10 No-Nonsense Ways to Manage Inventory
We recently worked with a client that had been using ABSS / MYOB Premier, but because they needed online access, they didn’t use it to manage the inventory aspect of their company.They used spreadsheets. ~Insert dramatic sigh here.~
As you can imagine, as they started to grow, the gap between accurate inventory and accurate bookkeeping was ever widening. This meant that they were unable to analyze and plan, and they almost crashed and burned when the marketing team made a big push to clear out inventory on the books … that they didn’t even have in stock.
Here are the 10 things they learned as we moved them from Spreadsheet to ABSS / MYOB Premier.
1. Don’t use spreadsheets. Spreadsheets can get deleted. They can have cell contents deleted. Entire rows and/or columns can get deleted. Formulas can get screwed up. Yes, yes, I know you can protect cells, but that rarely happens. People forget to update spreadsheets. Plus, then you have figure out a way to move that information into your accounting software.
2. Name your products clearly. Make it easy for your team to choose what to put on orders, or for people to buy online from you. Using manufacturer part numbers, or some internal part number, makes it easy for people to choose the correct item. Example: CYO523008 for “Crayola Crayons Set of 8” or CYO523016 for “Crayola Crayons Set of 16”.
3. Keep your warehouse organized. If your team can’t find anything, how can they fill orders? How can you do a count? A messy warehouse shows team members they don’t need to be held accountable, can create many safety issues, and cost you money simply because it’s inefficient.Keep locations and items clearly labeled, aisles free of clutter, and make sure your team knows exactly what is expected of them to keep the warehouse clean and organized.
4. Always order with purchase orders (PO). I’ve had many, many clients have employees over the years place phone orders with vendors. This is 100 percent unacceptable for clients with whom we consult. Every inventory order needs to be entered in ABSS / MYOB Premier, or your inventory management app, via a purchase order, emailed to the vendor, and then provided to team members who are responsible for receiving. This creates a paper trail for your business, and ensures there is no confusion for the vendor about what has been ordered, when delivery is expected, what estimated costs will be and what payment terms are.Many of our general contractors use POs for subcontracted services as well, as this allows them to verify any invoices for labor subs against scope and cost.
5. Compare delivery to the POs. If your business sends POs, then make sure your receiving team has access to them so that when inventory is delivered, they can verify that the numbers are correct. Make sure each delivery is counted and a team member provides notes if the delivered quantities differ from the packing slip and/or PO.
6. Set minimum stock levels. Most inventory management allow you set minimum stock levels or reorder points. This ensures that you never run out of popular items, or key components needed for assembly/manufacturing. Two of my favorite options in SOS Inventory are the ability to calculate reorder points automatically based on historical data and setting an alert for low inventory.
7. Do regular checks. You should do inventory counts on a regular schedule. People make mistakes when checking deliveries in and entering quantities into ABSS / MYOB Premier, and sometimes items just seem to grow legs and walk away. Staying on top of the inventory levels in ABSS / MYOB Premier will eliminate the problems that arise from not having enough of something to fulfill an order or complete a build. You can either do a complete physical inventory (counting all of the inventory at the end of the month), or you can schedule cycle counting (counting small sections/groups of inventory on a specific day).
8. Document processes and include tasks in job descriptions. Clearly document the workflow for all warehouse activities. By documenting each task in a workflow (i.e. purchase/receiving, sales/fulfillment and warehouse maintenance/stock status), and including these tasks in team member job descriptions, there is no question as to what comes next, or whom is responsible for them. Include backup and contingency plans for problems that can bring your business to aStandstill, such as a delivery not making on time, an unexpected cash flow issue, a spike in sales that creates backorders for customers or being short-staffed during a busy season.
9. Limit access to inventory. This applies to both physical inventory and within your accounting and inventory management programs. By reducing access and creating separation of duties, you’re reducing, at worst, the risk of fraud and, at best, the number of people that can make errors. By establishing access rights, you can make sure each team member is trained properly on workflow and the tasks for which they are responsible. This will make is much easier to manage inventory and the system you manage, identify when changes should be made, and implement those changes when needed.
10. Evaluate what is selling – and who is buying that what. It’s important to know when stock levels are getting low, but it’s also important to be able to identify sales trends. Once this company was up and running with an accounting system that tracked what was selling, when it was selling and whom they were selling, sales went through the roof. They were able to be proactive about stocking items that were more popular during certain times of year and identify busy times during the year to get temp help hired and trained BEFORE it hit.What they loved the most was that it enabled them to do some target marketing to customers that had purchased specific items in the past by offering sales on some older stock to clear out inventory and do some market research to determine whether there was a need and want for a new product they were considering.
All of this might seem overwhelming, but please remember: not all of this has to be done at once. Let us know if you like to know more about how ABSS / MYOB Premier can improve your inventory management in the company.