Do you track your inventory in your business? If you don’t, you should. Your on-hand inventory has a direct impact on your revenue, so the more you can get it under control, the more revenue you’re likely to generate.
Here are several key ways that tracking inventory can increase business revenue and help you achieve greater success.
1. Tracking inventory from multiple locations decreases waste
Businesses that operate in multiple locations often stock the same items across their various sites. If any of that stock is subject to spoiling or deterioration, it will be worthwhile to be able to shift it between your offices in direct response to demand.
That’s not easy to do unless the inventory is tracked in a digital system, however. When a business has multiple locations, it can become difficult to keep track of all the inventory from the corporate level without software.
When companies use software to track and manage inventory, such a program can typically save the operation thousands of dollars over time.
For instance, companies that operate a fleet of vehicles usually rely on Enterprise Asset Management (EAM) systems for tracking inventory and maintenance, but it’s actually more involved than the average system. EAM software tracks assets over their entire lifetime, from creation or acquisition through operation and into retirement.
For managing and tracking physical assets, this type of system is extremely helpful to manage costs, parts, and labor, and to track warrantable opportunities.
With strong tracking, businesses that operate out of multiple locations can send inventory to various sites on demand, reduce waste, and save more money. Just by tracking maintenance and inventory via one central software application, companies are able to save thousands of dollars each year.
2. Tracking inventory tells you what sells
Perhaps the greatest benefit of tracking inventory is being able to see what sells and what doesn’t, as well as how frequently certain items ought to be restocked. It’s essential to know what your most popular items are, especially if you hope to expand your business.
Once you’ve identified the items that sell best, you can put more resources into marketing them. On the other hand, when you know which items don’t move well, you can decide whether to keep them in stock or phase them out.
Sometimes, it’s worth keeping items in stock that don’t sell frequently, as long as they don’t take too much space in your storage. It all depends on your industry, the products, and whether or not those items generate a substantial profit.
When you’re on a mission to cut costs and generate more income, the best place to start is to study which products and services you might eliminate or improve. With accurate inventory tracking, you’ll know which ones to eliminate.
Before removing products from your lineup, however, check to make sure they’re not slow sellers for other possible reasons. For example, make sure they can be purchased as easily as any other product or service without raising issues.
Also, double-check your marketing. Sometimes items don’t sell because they aren’t being given proper promotional attention.
3. Keeping inventory on hand ties up capital
Excess inventory ties up your capital. When your funds are tied up in inventory you don’t need, this prevents you from putting that money back into your business.
For example, say you have $27,000 worth of inventory on hand that is not likely to sell for a year. It’s nice to have the inventory on hand, but that means that much of your money will be tied up for a year.
There are plenty of things you could do with $27,000 if you had access to it to reinvest in your business and expand your revenue. Even if all you had tied up was $5,000, that’s still a fair amount of capital that’s tied up for no good reason.
Typically, the better way to handle inventory is to keep only a small amount on hand and reorder more frequently. Many businesses have adopted this model for several reasons.
Most important, it prevents capital from getting locked up for a long time. But it also saves space. Businesses that order stock more frequently don’t have to rent large storage units or use up all their storage to hold their inventory.
Tracking inventory gives you clear vision
When you track your inventory, you’ll have a clear vision of how your business is doing by learning which products or services are most popular. Once you know that, you may reduce waste, regain access to capital that’s been tied up in unnecessary inventory, and improve your entire inventory system.
This is especially useful if you employ a system that automatically reorders items as they sell. The more you get your inventory under control, the more cash flow you’ll have available to make better use of it.