What is Inventory Management Process?

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Pratibha Devasenapathy | Nov-17-2020

What is inventory management?

Inventory is the centre of any trading business. A close tab on the movement of inventory can make or break your business and that’s why entrepreneurs always emphasise on effective inventory management. Accurate inventory tracking allows brands to fulfil orders timely and more precisely. Inventory management in businesses must grow as the company expands. With a strategic plan in place that optimizes the process of overseeing and managing inventory, including real-time data of inventory conditions and levels, companies can achieve inventory management benefits.

Any organization which is into production, trading, sales and service of a product will necessarily hold inventories to aid in future consumption and sale.

From the above definition of inventory, you can list down the following:

What is Inventory Management

Here are 8 Tips to become more efficient in Inventory Management           

What is inventory management process?

Since inventory becomes the epicentre of a trading business’ performance, it is imperative that there is an inventory management process in place. With this, you will be able to monitor and oversee purchases, to streamline business operations, maximise your return on investment (ROI), and minimise your cost. This can be easily achieved with an inventory management software that will give you accurate results for better business decisions.

Earlier, the conventional way to track inventory was to use pen and paper. Over a period of time, businesses switched to spreadsheets, and most small businesses still manage their inventory in the same manner. However, as the business grows, it becomes next to impossible to continue using manual methods or spreadsheets, since a business owner will end up spending more time managing inventory rather than focus on the overall business. Also, inherently entering data by hand, is time consuming and error prone, and tends to be a repetitive task, which can easily be automated. Most importantly, an efficient inventory management in today’s day and age demands a centralized database that is accessible to multiple resources in your business, across multiple locations and updates on a real-time basis.

How to choose the best inventory management process for your business?

Inventory management process could vary from company to company. Depending on their product line and size, the process to manage and track inventories differs. What’s important is to identify the best method for your business that would result in better performance of your company’s assets.

  • Choose a software that will help you gain better insights

Management of 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. Getting maximum number of reports within just a few clicks, will not only save your precious time and effort, but also remove any room for discrepancies. An intuitive business management software must allow you to handle real-time complexities with great flexibility. Here are some of the tips to choose the best inventory management software for your business.

There are several types of inventory control methods available and you can choose the one which suits your business. No matter which method you choose, it is important that the techniques should assist knowing and maintaining the right inventory levels at all stages. TallyPrime lets you customise and view your reports the way you want to. Let’ say you are in the stock summary report that shows the stock position of inventories, and you want to change the view that shows the ageing details. Just click ‘change view’ and select the view as ‘ageing’. There you go, the report now starts showing ageing details.   

  • Track and prepare job cost sheet

Given the complexities associated with managing costs for each job, most businesses have automated the preparation of job sheet using accounting software. Tracking material movement across the jobs, consumption and asserting profitability is easier using an accounting software. With reports and summaries available instantly, informed decisions can be made on-time. When you are managing job cost for each order, it sometimes becomes difficult to determine the actual cost for each job, location-wise. However, such capabilities should be seamlessly met by your business management software. And guess what, TallyPrime does just that! Creating multiple jobs or projects as cost centres, and tracking the cost and revenue associated with each project in TallyPrime is a smooth affair. You can not only just allocate costs while the job is in progress, but, on completion, you can also compare the selling price and profit with estimates. Make informed decisions based on the profitability of each job or project.

  • Store and ship your inventory smartly

In your business, you may be managing the inventory in multiple physical locations, such as shops, warehouses, bins, racks, cabinets, and so on. In this case, it is important that you keep a close track on which inventory is stored at which location. Especially when a business has multiple products, inventory will have to be tracked by defining unlimited groups, categories, batches, locations/godowns. While it can be an extremely daunting and confusing method to track inventory at multiple locations, but with an innate business management software, storage and shipment of your inventory can be a seamless affair. Let’s say you are using more than one location, bin, rack, cabinet, and so on. With so many locations and inventories, it is obviously tedious to keep a watch on the stock movement. TallyPrime’s godown capability will let you track your inventory by maintaining raw materials and finished goods in separate locations.

While all the above points are extremely crucial while keeping a close check on your inventory, to be efficient in inventory management, a whole lot of activities/ techniques are to be followed by the business.

We understand how important it is for you to maintain your inventory levels. With so many options available to track inventory, it can get confusing to select the best choice for your business. Flexibility being the key to operate any business management software, TallyPrime is designed to work exactly the way you want to. Thus, you can easily generate inventory reports based on the vouchers you have entered till date. You can even change the appearance of reports according to your requirements, for example, to make comparisons between different companies, periods of the financial year, and so on for better insights of your business. Find out what more you can do with TallyPrime’s inventory management feature, and try 7 days free trial for yourself. Yes, you will be amazed!

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