Efficient Inventory Management: The Key to Controlling Business Costs

For services-based companies, tracking inventory is just as important as it is for product-based companies. While measuring the cost of goods sold may not be their primary concern, having accurate inventory data is crucial for keeping costs low and streamlining operations.

While spreadsheets can be helpful, they can become problematic when tracking multiple changing attributes in real-time. Consistency, accuracy, and timeliness may all suffer when manually updating spreadsheets. Proactively managing inventory by tracking amounts, movement, and orders in real-time helps control costs. Companies can identify and correct errors more quickly, preventing small issues from snowballing into bigger problems.

 Benefits of Better Inventory Tracking

Inaccurate inventory amounts can cause delays, uncertainty, and frustration, leading to higher shipping costs and upset customers. These inaccuracies can cost companies big in the form of lost customers and developing a reputation for bad customer service.

Often, manual tracking and spreadsheets work until they don’t. By then, it’s usually too late, leaving companies and their employees scrambling to repair the damage.

Improved inventory tracking provides the following benefits:

• Eliminate or reduce added costs for expedited shipping – Having access to real-time inventory data allows companies to proactively order supplies or other parts in a timely manner, avoiding unexpectedly having to place expensive rush orders to meet customer demand.

• Reduce service costs – Having a reliable record of what inventory is on hand and where it’s stored can reduce or eliminate repeat, margin-lowering visits to customer sites due to misplaced or out-of-stock items. You’ll also increase the likelihood of upsells.

• Lower marketing costs increasing repeat business – Consistently providing high-quality service helps a company develop a good reputation. Happy clients will refer your business to their friends, family, and acquaintances. This may allow your business to reduce its marketing budget or target your marketing efforts in specific areas that yield better results.

• Improving cash flow – Better inventory tracking helps businesses optimize inventory acquisition, storage, and dispersal. It means you’ll have the right inventory on hand at the right time and won’t have unwanted or excess inventory languishing in the warehouse for weeks or even months. This improves cash flow and frees up resources for other areas of your business.

How to Track Inventory Movement and Status

Tracking inventory is hard. With so many moving parts and so many different people handling supplies, it’s easy for things to get misplaced. Businesses need to have reliable systems for tracking inventory throughout its entire lifecycle from the moment of acquisition to disposal or use. This includes visibility into the pick and pack and ship fulfillment stages.

Having visibility into inventory status and movement can decrease costs and increase efficiency in the following ways:

• Allocate the usage of items for true costs on jobs, projects, and events

• Improve customer retention by avoiding overpromising and knowing if supplies and kits are on order, en route, or readily available

• Avoid ordering unnecessary items or stock that hasn’t moved in months.

• Thwart theft by identifying sudden increases in usage

• Properly allocate landed costs by retaining visibility on a journal entry level with an “in-transit” status

Businesses typically track inventory movement by using a system of barcodes, handheld or automated scanning devices, and inventory management or business management software like an ERP (Enterprise Resource Planning).

Tracking Inventory Orders

Having visibility into when supplies or parts are expected can help teams work more efficiently and reduce costs. Consolidating inventory data into one system provides a single source of information for teams to collaborate and avoid out-of-stocks.

Knowing what’s on order and the status of that order can help cut costs in various ways:

• Avoid customer order cancellations by ordering within the right amount of time to avoid expedited shipping costs and delays

• Capture vendor savings by consolidating orders across multiple locations

• Reduce expenses by automating the entire order cycle and eliminating duplicate orders

• Establish controls with thresholds by tying purchasing to inventory

By actively managing your supplies inventory with the right inventory management software, automation, and real-time data, you can reduce costs and control spending.

At CertiPro, we’re experts in Sage 100, Sage 500, and Sage X3 implementations. We help businesses automate manual processes, streamline operations, and improve real-time visibility into operational and financial data. Contact us today to see what CertiPro can do for your business.