According to Brightpearl, a business management software company, keeping track of accurate inventory is not only essential for great customer service, but also for keeping accurate accounting records and having an efficiently running business. For certain business inventory may be as simple as office supplies for the employees, or as important as goods that are being sold to customers. Brightpearl has emphasized 10 main reasons for why keeping accurate track of inventory is important.
- Loss of sales due to out of stock items
- Loss of cash in overstock of inventory
- Improve accounting and profit reporting
- Identifying issues early on
- Customer Service
- Efficient Re-ordering
- Minimizing theft and losses
- Trust in your information systems
- Minimize warehouse costs
- Efficient stock take and end-of-year process
All ten of these reasons are great motivators to implement a more accurate inventory count within a business. I have witnessed firsthand what happens to a business that has no inventory tracking structure. I previously worked at a fitness club that had a section dedicated to nutrition and athletic clothing sales, and in the two years that I worked for that company I never saw a productive account of inventory. Every so often we would have a group of corporate representatives that came in to take count of our inventory. I was not surprised that they would report a huge loss for us; the thing that did shock me was they acknowledged the loss as if it was completely normal and acceptable. When looking at the ten reasons as to why taking inventory is crucial, I can definitely point out several things that took a hit by not being proactive with it.
In regards to customer service and losing sales, there were multiple instances where customers decided to opt out of a purchase because we didn’t have the products that they wanted. As customer service and sales representatives we had two options to help them; we could either try to transfer a certain product that they wanted from another location, or we could ask our manager to check if it will be on our next purchasing order. The problem with those solutions was that we weren’t able to close that sale, since nobody would want to pre-pay for a product they were not receiving.
Another huge issue was that our inventory would consistently cause inaccuracies with our purchasing orders. Since there was no theft or loss reported, purchasing managers thought that we still had certain products and wouldn’t place an order for them. The fact that we were not aware of the losses as they were happening, would carry over for when corporate would come in and result in a huge sum of money that was being lost.
In our case, upper management was not interfering with the fact that their investment was being accounted for as a loss. In order to make other people want to be responsible, they had to implement it at the top.
From a managerial standpoint, would you rather invest money into keeping an accurate inventory, or save your time and money and focus on making sales, accepting the loss as a natural aspect of business?