A number of small businesses have a love hate relationship with how they manage their inventory. Too much inventory and their holding costs increase. Too little inventory and the small business loses out on sales. Finding that middle ground requires the company use an inventory software system capable of tracking, forecasting and reconciling inventory.
Unfortunately, a number of small firms believe that the financial outlay to purchase such a system is out of their reach. What small businesses fail to realize is that running an asset tracking system will allow the company to reduce expenditures, free up valuable capital, reduce their overall inventory costs, and better meet the needs of customers.
The right stock control software can pay for itself over time by eliminating inventory waste in all its forms. So, just how costly is it for small businesses to manage their inventory? Unfortunately, most small businesses are unaware of just how much their inventory costs. They assume that these costs are relegated to the cost of purchasing and receiving parts.
However, there is a considerable amount of money tied up in inventory that drives up costs. This is commonly referred to as the cost of money. Everyday inventory isn’t sold, so the company must incur a cost. This is because most small businesses finance their inventory with business loans. Therefore, they must pay a daily interest rate to borrow that money. Ultimately, every day that product isn’t sold, is another cost to the company.
However, there are other cost drivers such as inventory obsolescence, inventory damage, the unnecessary costs of moving inventory from one location to the next, or the costs of freight to receive and ship product. All of these costs can be reduced when the small business is able to benefit from an asset tracking solution, such as a cordless or wireless barcode scanner.
When companies implement inventory barcode scanners, they are better able to identify which products have a high inventory turnover rate and sell quickly, versus those products with a low inventory turnover rate and take longer to sell. They are better able to manage their costs, adopt plans to deal with slow moving inventory, and reduce the overall impacts of retaining stock for longer periods.
Small firms certainly have enough to deal with. There are issues of cash flow, meeting day to day operating expenses and payroll, business financing, as well as the ups and downs of business itself. However, managing inventory often supersedes all these concerns. After all, it’s the company’s biggest asset and yet it costs so much to support.
A small business must incur significant financing to support their inventory. This means dealing with the cost of money every day that the small business retains inventory, and doesn’t sell it. Trying to reconcile that inventory with manual processes is next to impossible. It leads to errors and errors lead to high inventory costs. Smaller firms need access to a live system that can track their inventory daily and make adjustments according to customer demand.
