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How Does Inventory Turnover Affect The Business?

Inventory Turnover: As a rule, the greater this result, the better it will be for the company — of course, this does not apply to all enterprises, as some are not adapted to quick exchanges of goods.

But, generally, a high inventory turnover can positively affect your company. Understand better:

Reduction Of Losses Due To Fires, Robberies And Thefts

This is a critical situation to highlight since any company is exposed to such occurrences. However, it is clear that when the business renews its stock more frequently, the impacts of problems such as fires, robberies and thefts are more minor.

As the company is not so vulnerable to losing all its stock simultaneously, its operations are more planned and stable.

Reduced Storage Space And Costs

One of the managers’ most significant concerns is strategically reducing costs . After all, cutting expenses cannot affect the productivity and competitiveness of the business.

In this context, inventory turnover contributes significantly to the company. In general, you eliminate the need for large storage spaces, also reducing the costs inherent to these processes. This all means that operational costs are optimized.

Diluted Payment With The Supplier

One of the advantages of having a high inventory turnover is that purchases from suppliers are diluted, which means fewer outflows from the company’s cash registers.

In other words, when you replenish your stock frequently, you don’t need to make large volumes of purchases, and this is a strategy that favours the company’s financial health.

Lower Product Obsolescence Compared To The Market

One of the risks of large purchases of the company’s stocks is that these goods remain on the shelves and must be recovered over time. After all, the market is constantly evolving, and products stop becoming interesting quickly.

When stock turnover is well controlled, this problem is minimized. By avoiding the bulk purchase of the same item, you reduce the chances of its obsolescence in the market and, therefore, reduce your financial losses.

Favoring Demand Forecasting

As demonstrated in the inventory turnover calculation, it can also forecast demands and organize the company for subsequent periods.

This strategy is essential for maintaining a good relationship with the customer — as their needs will always be met on time — and for the business’s finances, which are better programmed to replace items.

Increased Inventory Turnover

You must also take action to increase inventory turnover in your company. Ensuring product rotation in the space is the best solution to achieve this.

To achieve this objective in commerce, for example, it is recommended that sales techniques be adopted. Among the tactics to be carried out, the following stand out:

  • be aware of your target audience’s preferences;
  • run promotions;
  • take advantage of commemorative dates to sell more;
  • adopt the minimum stock technique, having a reduced number of items in stock and ensuring that turnover occurs;
  • negotiate with suppliers so that you can make returns in cases of goods that were not sold;
  • practice logistics techniques such as PEPS (First In, First Out), preventing products from remaining idle for a long time without being offered for sale in the establishment’s windows or shelves;
  • use management software that provides inventory monitoring.

How Can We Improve The Company’s Inventory Turnover?

After all the information presented, we decided to bring some tips to improve your business’s inventory turnover to this post.

It should be noted that having this type of care favours business development and allows your company to become more competitive in the market.

Want to learn? Check out the tips and learn how to increase the speed of entry and exit of products in stock!

Make Purchasing Decisions Based On Sales

Dealing with a stock requires much attention, control and dynamism to make correct decisions and avoid losses.

Therefore, only create your list of goods with the supplier with concrete data. See the progress of purchases over the last few months and consider as much information as possible before finalizing them.

Increase Product Rotation When Necessary

Unfortunately, your stock may be complete, but the company’s cash flow does not correspond to this reality. Numerous situations contribute to this problem, so it is essential to know your inventory turnover well.

To eliminate the problem, our tip is to carefully evaluate the possibility of carrying out a tactical campaign – promotions offering differentiated discounts, for example.

Use A Computerized System To Increase Control

Taking care of inventory is more straightforward than many people imagine. Even so, depending on the size of the enterprise and the number of employees, keeping everything according to plan can be challenging.

Technology is an excellent ally of contemporary companies and has a lot to contribute to the daily life of the inventory sector. For this reason, investing in an excellent computerized system is advisable to improve this indicator.

These programs can simplify merchandise control, automating calculations and reducing errors that compromise profits. Finally, with software, you will know everything that enters and leaves your stock quickly and efficiently.

Negotiate With Suppliers

For a business to maintain adequate inventory turnover, it is essential to have a good relationship with suppliers. After all, they need to be aligned with your needs and be able to replace goods whenever necessary.

Invest In Audit

Audit processes are excellent for companies and can be applied in different sectors. The stock can also undergo this more detailed analysis to find errors and bottlenecks.

Therefore, it is interesting that you plan an internal or external audit at least once a year. Following this tip will make your stock much more efficient and balanced.

Also Read: Learn How To Create An Efficient Business Plan

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