If your business carries stock of any kind, good inventory management is important to prevent over-ordering, out-of-stocks and wastage. The key to having enough stock on hand to efficiently service orders lies in actively managing your inventory.
We recommend taking a critical look at the amount of cash you have tied up in stock. Taking steps to reduce this can significantly improve your business’ cash flow.
- Consider investing in inventory management software. Following the processes within the software will help you to easily identify and manage both fast-moving and slow-moving items. It will also allow you to promptly implement price increases necessary to maintain your profit margin in the face of rising costs.
- Cash up old or obsolete stock.
- Consider not stocking certain products that are available on short lead times.
- Discontinue slow-selling, under-performing lines – these will only be hindering your cash flow.
- Plan well ahead for busy periods. Inventory management software will allow you to forecast more accurately for seasonal demand.
- Physical stocktaking is essential for ensuring that recorded stock levels are accurate. A good alternative to undertaking a full, annual stocktake is to do rolling stocktakes, whereby you count smaller portions/sections of your goods on a regular basis. For example, segmented stock by supplier or product type could be counted quarterly.
Assess the security of your stock, and if necessary implement measures to reduce chances of theft. These may include:
- Using automated inventory management systems, which in turn also help to improve forecasting and reduce the chances of over-stocking.
- Having more than one person receipting goods and approving invoices.
- Increasing employee training and skills regarding inventory management.
- On-site security measures such as installing cameras.
UHY Haines Norton’s Business Improvement Manager Michael Jamieson advises all types of businesses on inventory management systems and is an expert at helping businesses to improve their profitability and cash flow. For more information please contact Michael on 027-663-6062 or email firstname.lastname@example.org.