Why is Inventory Management Important for your Business?
If you are running a product-based business, you know how difficult it is to manage your products, track your stocks and organize your inventory. Yes, this is why inventory management is a critical need for your business. Learn how a systematic, integrated, and automated management of your inventory can drastically improve your efficiency.
What is Inventory?
The word ‘inventory’ means a complete list of items such as property or goods in stock. It is the raw materials used to produce the goods for sale and the finished goods.
Types of Inventories
· Raw materials: The unprocessed materials needed for the manufacture of the desired product. Example: Cotton, silk, etc. for textile industry, wood for carpentry
· Work in Progress: The partially finished or products under construction waiting for completion. Example: A half-assembled automobile
· Finished goods: The products which are ready for sale. Example: Clothes, vehicles
Inventory management in business
A balance between the amount of inventory coming in and going out is an essential factor in the success of any business. Overstocking inventory often leads to loss by limiting cash flow and creating a budget issue. Overstocked inventory or dead stock sits in storage and does not find its way to the market for sale.
Lack of inventory also affects businesses negatively. Informing the customers about not having necessary goods or making them wait for a long time before delivering the products may affect adversely. It limits the customer service and forces the potential customers to go elsewhere.
An effective inventory management system enables businesses to maintain the balance between going under and overstocked.
Purpose of Inventory Management
The primary purpose of Inventory Management is to support businesses to order, store and sell the inventories easily and efficiently.
Importance of Inventory Management
Inventory management helps businesses to arrange the needed amount of inventory at the right time in the right place. It simplifies the process of ordering, storing and using inventory.
As the inventories constitute the soul of any business, it is important to have an effective management of the same.
If you are looking for the perfect solution for inventory management, check out SimpleAccounts because it not only automates your inventory but also solves all the bookkeeping problems.