A Guide to Inventory Control
Are you a business owner who relies on customer sales? Read this guide to find out what inventory control is and how you can do it effectively.
Inventory control is important for the success of your business and meeting customer demand. You need to ensure you have enough stock to still promote it online or in store. You’ll also need to have good contingency plans if you are not able to restock in time for customers. It is essential for accurate financial projections and in the event you need to sell your business as well.
What is inventory?
There are 3 main types of inventory a business can have:
1. Raw materials inventory
This includes the raw products you use to create the end product that you actually sell. This could be the fabrics you buy in bulk to cut and sew into the dresses that you sell in the end. This is pretty much anything that goes into the process of making your product.
2. Work-in-progress inventory
This is any unfinished goods that you haven’t yet completed. If you manufacture cars, this includes any cars that aren’t yet finished to sell to customers. These need to be counted in your overall inventory stock check because they still hold value.
3. Finished goods inventory
These are the finished, ready to sell products. If you are buying products already made and just reselling, all of your stock would form part of this category.
Selling based off inventory
It’s no secret that these days almost any business can be started online. It’s easy, efficient and cost effective, meaning you can streamline your business like never before. In order for your business to thrive though, you need processes that are just as efficient. A proper inventory control system is one such process.
All businesses run on stock in some way or form. You need to advise customers if things are out of stock or you are fully booked. This avoids unnecessary disappointment if they purchased something and find out they can’t actually receive it.
It’s also a fantastic marketing technique. Advertising that there’s only 1 handful of a certain time slots left or product, it incentivises people to take the next step and purchase in fear of missing out.
Any business, online or otherwise must make money to survive. This means selling enough products to start making a profit and give that business a value. In order to accurately predict your weekly or monthly budgets, you need to know how much stock you have on hand.
Every single product in your warehouse no matter the size has a value, and that needs to be taken in to consideration. If you are not able to move a particular product as well as others, consider selling off the remainder stock and introducing a new product to replace it. You’ll need to know how many you have to sell in order to be able to afford this.
You also need to value your stock at the end of each financial year. So to save a lot of time, effort and money trying to count everything at the last minute, ensure you have a good system throughout the year and maintain it.
Selling your business
If you ever decide to sell your business, you will need accurate records of your stock. This is because your assets and stock will become part of the negotiations between you and the buyer. Knowing exactly where you stand allows you to better negotiate and get better value for your business.
All the stock you still have on hand will also become part of the value of the business. You should definitely get it valued by a few people first so you know how much you are due when you sell.
Before you can even get any interest in someone purchasing your business, they will want to know how well you can move the products and how much success you have had. This entails keeping very close records of all your stock numbers throughout the years. You must note how much you received and when, and also how may you manage to sell.
Having a good inventory control system will see that you are never out of stock for long. There’s nothing worse than missing out on customers because you didn’t have the products there. Having alerts when you are running low will mean you have enough time to re-order more and have it arrive in time for more purchases.
There is also a good marketing tactic you can use when out of stock. You have already made the re-order and you when it will arrive. Advertise to everyone that a product is completely out of stock, and keep marketing that product. This will built excitement for when you do receive the stock and people can start purchasing as soon as you receive it. This way you are not stuck with too much stock at any given time.
Inventory control is necessary to ensure the efficiency of your business. Everything revolves around the stock you have. How much you are able to sell, how quickly and how much profit you can make all comes down to this.
Taeisha is a Legal intern at Lawpath. She is a Law student at Macquarie University, previously completing her Commerce degree. She has an interest in Commercial Law.