An article on Entrepreneur.com gives some helpful insights on how a small business can best manage their inventory
Maintaining Enough Inventory
If your business is a start-up it might be quite difficult figuring out how much inventory to order, since you cannot go off of last year’s sales.
The article suggests predicting your first year sales based on your business plan.
“When calculating basic stock, you must also factor in lead time — the length of time between reordering and receiving a product. For instance, if your lead time is four weeks and a particular product line sells 10 units a week, then you must reorder before the basic inventory level falls below 40 units. If you do not reorder until you actually need the stock, you’ll have to wait four weeks without the product.”
Insufficient inventory equals a loss of sales.
Avoiding Excess Inventory
At the same time, you do not want to over order. This can be quite common with companies who sell seasonal products. To prevent ordering in excess set a practical safety margin and only order what you know you can sell.
Inventory and Cash Flow
Did you know that as much as 80 percent of a company’s revenues come from only 20 percent of the products? This is called the “80-20 Rule”.
Cash-flow problems are the most common difficulties small businesses face and it is most likely the first sign of serious financial trouble. Placing a majority of the company’s money in inventory can heavily damage the cash flow.
“To control inventory effectively, prioritize your inventory needs. It might seem at first glance that the most expensive items in your inventory should receive the most attention. But in reality, less expensive items with higher turnover ratios have a greater effect on your business than more costly items.
Divide materials into groups A, B and C, depending on the dollar impact they have on the company (not their actual price). You can then stock more of the vital A items while keeping the B and C items at more manageable levels. This is known as the ABC approach.”
If you are looking for a great tool to help control and track your company’s inventory, look no further than a Point of Sale System.
A POS system is easily manageable and records each sale as it takes place so that your inventory records are constantly up to date.
Your Point of Sale System can easily help you stay on top of your inventory, so that you are not losing money.
Sintel Systems is a quality provider of tailored Point of Sale systems across retail, restaurant and service industries, including frozen yogurt shops, pizzerias, sushi restaurants, cafés and retail stores.
As a single source for business solutions, our experienced, knowledgeable team negotiates the complex POS landscape to enable you to find the right POS system for your business and budget. Hardware – Software – Support