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Financial Control: 7 Inventory Management Mistakes To Avoid

Good inventory management is essential for companies looking to achieve greater financial control, as it is through this that your company will be able to save money and avoid waste.

Having large quantities of a certain product with low inventory turnover represents money sitting idle since inventory is not a cost but rather a company asset.

See how inventory management helps with your company’s financial control, what the main mistakes are, and how to avoid them.

Not Carrying Out A Stock Inventory

Without a doubt, not carrying out periodic counting and monitoring the entry and exit of the various materials in your company is a huge mistake. If you need to know what you have and how much comes out of each item, you have a recipe for failure.

You will only discover the lack of products when it is too late, and because you are unaware of your turnover, you will buy the wrong amount (or too much, or too little).

This situation will also cause discomfort among your customers; after all, they went to your establishment to purchase a product and were unable to buy it.

So, there are no excuses! Regardless of your industry, inventory counting should be part of your business routine.

Not Buying According To Demand

Knowing how to purchase the correct quantity of products your company uses is key to successful inventory management and increased financial control.

Before making any acquisition, you need to evaluate the quantity of the product in your stock, analyze the turnover it has, and check whether there is really a need to purchase it. To do this, following our first tip is essential.

But don’t think that buying excessive products is the only thing that harms your company’s financial control. Purchase products in quantities lower than demand will also prevent your company from losing sales due to being unable to serve the customer.

This lack of products will erode your relationship with the customer and harm their loyalty, compromising recurring purchases, which are one of the main factors in making up your revenue.

Correctly understanding the demand for each product and limiting maximum and minimum stocks allows for more accurate financial planning and avoids waste.

Not Having An Inventory Management System

Gone are the days when controlling your company’s inventory at the tip of a pencil or through digital spreadsheets was enough. With the constant increase in consumption, the flow of information has become very large.

Not using an inventory management system is a big mistake and leaves room for errors. Filling out spreadsheets is very demanding and, amidst the endless administrative tasks, ends up being left aside.

Through a management system, you can generate accurate reports on the demand for each product, check the direct return on sales, and easily identify which products need to be replaced.

Not Paying Attention To Idle Stock

It is very common for companies to leave materials that do not have a rotation aside and forget that they paid (a lot) for them.

As we have already said, the stock is idle money, and, over time, it could become a loss due to the natural deterioration of products or obsolescence due to constant market developments.

What was just idle capital will turn into a huge loss! By monitoring stocks, you will know which products need some action to stimulate turnover.

Creating promotions or actions that encourage purchases will return the amount invested to the company’s cash flow.

Having Only One Supplier

It’s a fact: buying only from a single supplier will cause you to lose money, as well as create unnecessary dependence constantly.

Many suppliers take advantage of this relationship to charge prices above the market, so searching for more than one supplier will give you more security in purchasing decisions, as well as an overview of the market value of the products.

Seek to quote and maintain a relationship with at least three suppliers of each product, seeking the best connection between price, quality, and delivery time.

Not Identifying Products Correctly

Let’s take an example: your company sells screws to a factory. There is a multitude of screw models with different sizes and thicknesses, but your company identifies the models only as slotted, star, and hexagonal.

How would you count the stock of each quantity? And how is the model you have the same as what your customer needs?

Of course, this example is somewhat exaggerated. Still, to avoid this type of situation, each product must be properly specified according to its characteristics: brand, model, size, material, and color.

In addition to allowing materials to be counted, identification helps organize materials within your stock, which leads us to the next error.

Not Organizing Inventory

It’s only possible to invest in the best and most expensive management software to control the stock of your products if you know where they are.

Maintaining stock properly organized, separating products into similar groups, and also by their characteristics, is essential to avoid loss and damage to merchandise.

The organization also makes it possible to control the validity of the products you have and create actions, when necessary, to speed up their exit.

Also Read: Financial Sector: 5 Technological Trends For The Sector

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