February 2019

5 Ways to Better Manage Your Company's Inventory

6 minute read

If you're running a business that relies heavily on selling products, you know just how crucial managing inventory is to your organization's bottom line. After all, poor management of your goods in stock could lead to a host of stressful and costly problems: the failure to accurately forecast, incurring preventable returns, overstocking, and conversely, not having enough on hand to meet demand.

Interestingly enough, it turns out many businesses don't manage their inventory well. According to recent research by the U.S.-based retail analyst firm IHL1, ineffective inventory management costs a staggering $1.75 trillion (USD) in lost business among e-commerce businesses alone. On average, the loss adds up $2.32 trillion (CAD), which is 11.7 percent of lost revenue per business each year.

Want to prevent such losses and stay on top of your inventory? Here are a few ways how:

1. Maintain accurate records

Track product info and maintain up-to-date records of your entire inventory. For each item, note the supplier, SKU, barcode date, countries of origin and lot numbers. Other info to track is the cost of an item over time. That way you're mindful of variables that may influence the cost, such as seasonality, scarcity and change in suppliers.

2. Perform an inventory audit

Do an itemized count of each product in all your lines to make sure they match your estimates. Gauge whether it's best to perform such an audit daily, weekly, monthly or yearly.

Some products, such as your best sellers, might deem a daily check, while last season's or older ones might only require a monthly or yearly check. Also, some goods might only need a period check during a business low, while those higher in demand should be checked more frequently. While incurring an up-front cost, the right equipment and an updated system can help track your goods. A solid software system will cut back on inefficiencies and provide you accurate analytics so you can make the best decisions for your business. Invest in dependable mobile scanners and a POS system that are a good fit for your needs.

3. Review the performance of your suppliers

Suppliers that don't meet your time frames for delivery or are inconsistent in the quality will prove problematic and costly. Take time to assess the reliability of all your suppliers.

If your suppliers are falling short, discuss the issues you're having regarding their performance. If they don't show signs of improvement, it might be time to move on.

4. Devise a backup plan

Devising a Plan B or C to ensure you are well-stocked with goods will prevent you from getting blindsided in case you run into issues with your suppliers or snags with the freight forwarder. During a slower period, consider researching additional suppliers and freight options and getting quotes for hypothetical scenarios. Sending out inquiries, making initial contact and building rapport with your suppliers will make things easier when an emergency scenario hits.

5. Aim for cash flexibility

Having a cash reserve can ensure your business runs smoothly during slow periods. Consider a business loan or corporate credit card from American Express, which can allow you to maintain cash flexibility and tap into additional funds as needed.

In addition to providing an unsecured means of funding, you can also accumulate credit card rewards. And by paying suppliers before the net is due, you may be able to benefit from early payment discounts—rebates that can save you money. Plus, you'll save on the processing fees that come with issuing cheques or wire transfers, freeing up additional cash to apply elsewhere.

You can also bolster cash flexibility through American Express' working capital solutions, which allow you to earn time while existing inventory is sold. You could have up to 55 interest-free days to pay your American Express depending on when charges are posted to your account, whether your account is in good standing and the closing date of your statement. Your company will have access to cash on hand to cover accounts payable, as well extra capital to purchase more supplies and equipment or apply toward operating costs. In addition, when clients pay you via American Express, you can speed up your receipt of payment, in turn, extending your overall business cash flow.

Staying on top of your inventory management will prevent costly issues and unhappy customers. In turn, it'll help bolster the growth of your business, paving the way for continued—and greater—success.

1 https://www.businesswire.com/news/home/20150506005233/en/New-Research-Report-Retailers-Lose-1.75-Trillion