Inventory is money sitting around in another form. You paid money for your inventory, and you will get that money back when you sell it. Until you sell them, managing inventory is crucial.
The way you manage your inventory will have a direct impact on the cash flow of the business. Inefficiency in managing inventory will put your business at a disadvantage. Inventories hold a huge amount of your working capital and stocking excess inventories implies that cash tied up. Just like Cash flow, it can make or break your business.
Being efficient in inventory management will boost your cash flow and creates enough cash cushion for you to invest better. Similarly, not being on top of inventory management will lead to increased cost of managing inventories and it exposés to various risk such as loss due to price fluctuations, stock deterioration etc.
Here are 5 Inventory management reports which help you to be top of your inventories and manage it efficiently.
Stock movement analysis
Stock Movement analysis is an inventory management report that shows the flow of the inventories in an organization. This inventory management report shows inflow and outflow of inventories along with the quantities for a given period. Using this report, you can get to know the fast-moving and slow-moving goods. Fast-moving goods are the one which gets enchased quickly while slow-moving goods block the working capital.
For businesses, it is important to know the movement of inventories such that they can invest in the right inventories and get rid of cash blockage. This inventory management report will play a key roll in the efficient management of inventory.
Re-order level
Re-order level and minimum order level will be super-critical for optimum inventory management. Overstocking will lead to cash flow blockage and the additional cost for managing excess stock. On the flip side, understocking leads to loss of sale due to non-availability of stock at the right time. Re-order level and minimum order level will rescue from the situations of overstocking and understocking.
These inventory management techniques help in replenishing the right inventories with the right quantity and maintaining optimum stock levels.
Ageing analysis
The faster a stock gets sold, it increases the profitability and impacts the cash flow positively. Who doesn’t want to sell their stock quickly? Every business would love to do it but that isn’t the situation always. Every business, at any given point in time, will have stock or certain quantities of stock with higher inventory ageing. While the reasons could be plenty for not being able to sell it but not being on top of such inventories is an error. This becomes extremely critical if the durability of the stock is short.
Regularly preparing stock ageing analysis will help you to keep track of the age of stock, as the older stock may depreciate or become obsolete, and result in a loss. More importantly, you can plan to sell those before it becomes too late.
Stock-wise profitability
It’s a no brainer that the profit margin of the product you deal will have a direct impact on the profitability of the business as well as cash flow. Each inventory you deal will have a different profit margin, some yield high and some with a low-profit-margin.
On a plain understanding, it may sound like investing more on the inventories which yield high profit is a wise decision but not always true. Why? A stock may yield low profit, but the outward movement is high and thereby creating regular cash flow opportunities. Similarly, the profit margin of a stock item may be high, but the product movement is slow. This will result in cash blockage for long-time.
Regular review of Inventory-wise profitability helps in knowing the high and low profitable inventories. This report combined with the inventory movement analysis will help you to invest in the inventories which are profitable and help you generate more cash.
There are far more ways to improve cash flow. Read our article ‘ Tips for Efficient Cash Flow Management’
Stock summary
Stock Summary is an inventory statement which discloses the closing stock held by the business on a given date. This report gives you visibility of the saleable and net stock available with you – considering stock-in-hand, delivery of supplies on the way, and sales orders of customers yet to be fulfilled. With this, you will always be able to take the right decision in terms of accepting the order. If the saleable stock is short, you can buy enough time to full fill the order or reject it. Thus, ensuring high levels of customer satisfaction.
This report helps you keep an eye on inventories by giving you complete stock viability across multiple locations, warehouse or business units.
Conclusion
No doubt! Managing inventory is one of the crucial aspects of the business. Inventory is one such thing which will make or break the business. All of the above-discussed inventory management reports are key to increase efficiency in inventories. We know preparing such inventory reports is not an easy task as it involves a lot of efforts and time. Not having accurate inventory data will completely defeat the purpose of preparing these reports.
Most successful business use integrated Inventory management software to manage inventory efficiently and mitigate the associated risk easily. Using inventory management software will automate the inventory management process and all the inventory reports will be auto-generated. Thus, you always have on-time, accurate and actionable information for you to make a confident decision.
