Inventory is the core aspect of every wholesale and retail business. It’s basically the one that keeps their business afloat. However, when inventory problems and discrepancies arise due to poor inventory management, the business could end up losing money. In cases like this, some businesses turn to inventory financing to help them cover the losses.
Having strong inventory management in place is crucial in maintaining the success of your small business. Whether you’re selling car parts, clothing, or food, you need to be able to control your inventory to keep up with the tight margins and maintain stable cash flow. While inventory mistakes are common among businesses, there are ways in which you can avoid them.
Here are the some inventory mistakes that can ruin the financial stability of your small business:
1. Ordering Too Much Inventory
It’s easy for novice business owners to think that the more inventory they have, the more sales they’re going to generate. But it’s not that simple. Foods, for instance, are perishable and would be of no use when it reaches its expiry date. Clothing trends could go out of style. The last thing you want to be in is to be stuck with an excess inventory that you have no idea how to dispose of.
The easiest way to avoid this problem is by doing thorough research. To have a good idea of how the market works, carefully study that data. Check if the goods you’re ordering is moving fast and observe its profitability. Ideally, you should use the ABC method of categorizing your inventory where A is the most in-demand product and C being the least in-demand product.
2. Not Doing Regular Inventory Checks
Many businesses are still stuck on traditional inventory checking techniques where they close up for a day to do inventory checks. Because of this, they miss out on sales. This is also why most of the companies do it once a year.
Less frequent inventory checks can be damaging since important issues like poor forecasting and shrinkage are overlooked. Aside from that, changes can also happen each month and you may need to update your inventory to supply the demands. When you do inventory once a year, you won’t be able to fully optimize your systems.
One way of dealing with this is to adopt an automated inventory program. A lot of software these days allows entrepreneurs to be updated on their inventories each day. This will eliminate the possibility of profit loss and may even empower your employees. Moreover, a reliable inventory tool could also reduce mistakes and provide an accurate report on your inventory levels.
3. Not Training Your Staff
Inventory management can be tricky and therefore, would require sufficient training to use. Oftentimes, small to medium companies don’t send their staff for inventory training in an attempt to save money. Even if they do, they only send one employee to learn the basics. With so much to do and only one employee to handle the inventory check, it could cause the system to fail. If you think about it, business owners are actually losing more money by not sending their staff to training.
Cloud-based inventory programs, for instance, are now common and are beneficial in so many ways. These types of programs are easily learned, thus eliminating the problem of longer training days for your employees. If you’re someone who travels a lot, this inventory management system also provides easy access so you can stay updated wherever you are.
4. Applying Outdated Inventory Management Methods
A lot of entrepreneurs still believe that doing manual checks or sticking to excel spreadsheets is better. This type of mindset is also one of the reasons why inventory management fails in some retail and wholesale businesses. Manual inventory checks are tedious, time-consuming, and could even lead to your business missing out on sales.
Many inventory management tools are now available for business owners to help them with their inventory checks. These are designed to handle the intricacies of inventory checking as well as tracking and fulfilling orders. These programs help entrepreneurs save time and effort allowing them to focus more on other aspects of the business, like expansion.
5. Failing to Order and Re-stock Inventories
Though reordering and restocking goods is a no-brainer, a lot of businesses still fail to do this mainly due to an inefficient inventory management system. Out-of-stock products are one of the leading reasons of profit loss in businesses. This is especially common in stores and warehouses where there are a lot of employees handling different items. Without an effective system in place, it can be difficult for entrepreneurs to track items that are running out.
Labelling items can make it easier for entrepreneurs to organize their products and determine what needs to be restocked. QR codes, for example, are often used by companies these days for effective product tracking. Some of these programs also offer a reminder system that lets owners know if they’re running out of a specific item.
Avoid Losses by Applying for an Inventory Financing Today
In a way, these mistakes are interconnected to each other and learning how to avoid them will ensure that you won’t have to deal with inventory problems again in the future. Using the tools available today will help you track your inventory efficiently and maintain the stable flow of your inventory. If needed, inventory financing can also be of big help when it comes to solving inventory problems. The experts are always available willing to assist you every step of the way.