Many businesses start out with basic financial management software, consisting of general ledger, accounts payable and accounts receivable. As the business grows, managing inventory becomes essential to the profitability of the business. Three software modules work together to provide excellent inventory management: inventory, order entry, and purchase orders. What are the signs your business is ready to start looking at an inventory management system?
- You sometimes forget to ship backordered items. Without a system to track items on backorder, it can be easy to forget to ship those backordered items. An order entry system allows you to ship the items that are available, and keep track of those unshipped items, so you won’t forget to ship them once available.
- You are unsure about when to re-order, and how many of each item to keep in stock. With an inventory system, you can run reports that show demand for each item within the time period you choose, so you’ll know when you are running low, and have a gauge for how many to keep in stock. For example, in the busy sales months you can maintain inventory levels for your customers, but in the slower sales cycle you won’t have a shelf full of obsolete items.
- You are unsure which items you sell are the most and least profitable. One item seems to be flying off the shelf, while another has minimal sales revenue. Not knowing of which of those two items is more profitable is a huge mistake. If the slow seller is more profitable, a smart idea would be to focus on increasing sales to improve overall profitability.
- When a customer places an order, you cannot tell whether those items are in stock. If you constantly have to walk back to the warehouse or call somebody to physically check on the stock status of an item, you are doing your customer and yourself a disservice. Checking stock manually wastes your employees’ time. It can also result in broken promises or delayed shipping to your customer. Adding a computerized system for checking inventory can greatly enhance your customer satisfaction, and can improve the efficiency of your business.
- You have different pricing levels for your products which are currently accessed from a paper file. If you are keeping pricing information on paper, it can be hard to tell which pricing is the most current, and sometimes the correct sheet can even disappear. Having your software keep track of multiple pricing levels is a much more secure and organized way to keep track of pricing. By assigning each customer their respective price level, your orders will automatically show correct pricing when the order is entered into the system.
- Order entry and order invoicing are currently done in two separate systems. If you have one system to keep track of orders, and another separate system for entering the accounts receivable invoice, you are spending double the time entering the same information. You can save time and reduce manual errors by electronically entering orders and creating invoices.
- Do you have items that can be sold in different units of measure? For instance, you get a discount for purchasing items by the pallet, but your customer buys them by the carton. Having an inventory management system allows you to receive the items in the unit of measure you choose (in this case, by the pallet) and then sell in another unit of measure (i.e. by the carton). The system will also keep track of the item’s purchase price, and the cost of goods sold, in the unit of measure specified.
- You track serial or lot numbers on paper or in a spreadsheet. You are tracking serial or lot numbers for a reason, and that reason is to keep track of who got which items, in case of a faulty lot or recall. Having the information on paper can be risky because papers can get lost or damaged. An inventory system allows you to track this information electronically, so you can always run a report to see who got what.
- Are you wondering why your profitability is down? With inventory management, you can run reports by item, product line, or sales category showing each item’s profitability, so you’ll know along the way the trend for each of the items you sell. That way you can fix the problem early and maintain your profitability.
- Your inventory is running you! The right inventory management software can provide the tools your business needs to increase efficiency, provide excellent customer service, and help you to take control of your financial management.
Integrate Order Entry
Do your processes include writing down your customers' orders, only to have somebody else enter the information again to create an invoice? If so, you are spending more money and time than necessary by paying two people to do virtually the same job. You can save time and increase the accuracy of your orders by implementing order entry into your system. Using order entry allows one person to enter and save an order, and that same order can then be turned into an invoice when ready. You will save money, and also reduce human error, increasing customer satisfaction.
Automate the selling of different units of measure.
Some customers want a case, others want a whole pallet, and still others only want one of that same item. Sound familiar? Do you have to 'trick' your software into handling this scenario, or end up doing inventory adjustments? You can solve this costly problem by setting up one inventory item with multiple units of measure. By setting up the selling units you need for each item, you can have your system calculate how many you have in stock by unit, and you can easily buy, sell and stock your items how you choose. This can save you significant time and will also give you a more accurate picture of how many items you really have in stock. Most importantly, you can quickly tell your customer how many you have available in the unit of measure they choose.
Set up and use assemblies to build or 'kit' items
Do you put several items together and sell them as a kit? Or, do you manufacture something composed of many raw materials? Do you endure the painstaking process of entering each piece of the final item separately into your accounting system? If so, you can drastically cut down on time and increase accuracy by setting these items up as 'assemblies'. Setting up an assembly allows you to place a finished product on an order, and it will take all of its components out of stock for you behind the scenes. This cuts down on data entry and keeps your inventory counts and costs accurate.
Take physical inventory more often
Having an accurate count of the items in your inventory can save your company money, and your customers will be happy to get a quick and accurate answer on whether an item is available. You can make your physical inventory process easier by using a system that allows you to keep selling products while you take counts. The sales staff is happy because they can keep selling, the warehouse manager is happy because the counts are accurate, and the customer is happy to receive accurate information in a timely manner.
Track inventory by location
Is that item in the back warehouse? On the retail floor? Or is it out on one of the delivery trucks? If you store items in more than one location, you should quickly be able to see exactly where it is by location. You can accomplish this by setting up more than one inventory location in your software. If you have the ability to set up unlimited inventory locations, you can even set up (for example) a delivery truck as its own location. Setting up multiple warehouses saves you time searching, and can also reduce costly shrinkage.
Automate tracking of serial and lot-numbered items
Still tracking your serial or lot-numbered items on paper or in a spreadsheet? Not only does this make the receiving of those items time-consuming, there is no trail associating your customers with the serial or lot numbers for the items they purchase. You can set up your system to capture and store the serial or lot numbers for your inventory upon receipt. Then when you enter your customers' orders, you can choose which serial/lot numbers they have purchased. Your company will save significant time by keeping track of those numbers in one system, and you'll keep your customer happy by being able to quickly access which serial or lot numbers for the items they have purchased. This also helps you keep easy track of warranty information.
Let your software system keep track of customer pricing
Are you tired of flipping through files to find what your customer paid last time, only hoping that the page on top is the most up-to-date? You can eliminate this hassle by setting up your customer pricing in your software system. By setting up customer pricing in the software, you will ensure better accuracy, keeping your customers happy, and you'll also save yourself wasted time and hassle.
Track profitability of inventory items
How easy is it for you to see which items are the most profitable? How do you know that the items you promote or sell the most are bringing in the most revenue? With the ability to run reports showing profitability (Gross Profit Margin) by each individual item, you can check often to be sure you are selling the right items. By easily accessing this information, you can focus your sales and marketing departments on selling and promoting the most profitable items, enabling you to improve your bottom line.
Enter purchase orders from order entry
Have you ever run out of an item, and forgot to put it on order for your customer? You can have your system prompt you to enter a purchase order directly from the order entry screen. By doing this, you will be sure to get the items for your order, keeping your customer happy. You will also save time by taking care of both functions at once.
Know which items you have so you can keep just the right number in stock
Are you surprised when you run out of an item? Or how about when you find a huge overstock? Set up your system to keep a minimum and maximum amount for each item. Then you can easily run a report at any time, showing what you are running low on so you can order more before you run out. You can be sure you don't waste valuable shelf space by overstocking any items. This will streamline the purchase order process too, saving your company hours of time.