Inventory management is critical to businesses that sell products online and in stores. Broadly speaking, it’s the processes and tools you use to keep track of stock levels as you sell. Without it, you’re flying blind. So what’s good inventory management and how does it improve business?
Good Inventory Management Makes Business Better
Inventory encompasses all the products you buy with the intention of selling with the hope of making a profit. From the time you purchase a product to the time you sell it, your inventory is considered an expense. So inventory management requires a way for you to record a product as you enter it into your inventory, and to remove that inventory at the time you sell that product. Good inventory management, in turn, relies on the most up-to-the-moment data about your inventory as you sell. The result will be better sales, better margins and better cash flow.
When you can adjust your inventory levels in your warehouse with each sale you make online, you can sell more of the right products and improve customer loyalty. Good inventory management lets you avoid stock outs that can send customers to your competitors. It also lets you accumulate data so you know what products to restock and what products to phase out.
Get Better Margins
Margins are a balancing act. You want to buy at the lowest price, sell at the highest price, and sell products as fast as possible to keep down your holding costs. But you have to weigh things like purchasing at volume to get a discount against your ability to sell that product. Only good inventory management tracks your sales and stock data accurately enough to tell you if you’re making the right purchasing decisions or if your carrying costs are eroding your margins.
Why is inventory an expense? Simply because you have to buy first in order to sell. So when you spend money on products that don’t sell or sell quickly enough, your cash flow gets bogged down in inventory expenses. Good inventory management gives you the visibility and control to focus your cash on products that don’t tie you down.
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