Inventory systems hold detailed records of your products, quantities, stock locations and more of the business’s assets. The main purpose for having a quality inventory system is to maintain up-to-date records of supplies. The additional reasons to maintain correct inventory records are for financial accounting, customer order fulfillment, stock replenishment and having the ability to locate a specific item.
Inventory Validity for Stock Replenishment
By maintaining a valid record of your stock on hand, your inventory replenishment system will keep desired inventory levels. As necklaces are purchased and pulled out of stock, the inventory replenishment system can place re-stocking orders from your distributors. When your count for inventory is not up-to-date, the inventory system may guess that stock is available when it isn’t. This type of inventory inaccuracy may cause the inventory system to not re-order required merchandise and may result in out-of-stock in turn a loss of sales, as customers will seek else where for the desired merchandise.
Locating Inventory
Having accurate inventory locations in your inventory system lets employees and management quickly go to a specific storage area to locate the product wanted. For example, in the backroom of the jewelry store there are 1,000 necklaces. If your inventory is not organized, sorted correctly and accounted for accurately, how could an employee find a specific style or chain length for any customer? Organizing and maintaining precise records of products, as well as quantity you have on hand and it’s location allows employees to quickly access inventory.
Inventory to Support Sales
Businesses invest in inventory to allow product to be readily available to meet potential customer demand. Imagine shopping at a furniture store, you found a table and chairs that’s perfect for you’re dining room but they only had 3/4 chairs in stock. Those customers would leave and go to a store that had 4/4 chairs available, sales would immediately fall and the store would more than likely close. Through correct maintenance of the inventory system, the store has accurate inventory records, which in turn keep the shelves and backrooms stocked with the latest styles, quantities and sizes customers need. To ensure the inventory system is correct, staff must properly transact all inventory receipts, returns and sales in the business’s inventory system.
Inventory to track loss
Whether you are retail clothing store or a general contractor. It’s important to know your inventory. If you order 50 purple shirts at the beginning of the month and reviewing sales show that you have only sold 15 shirts, after reviewing inventory you find that you only have 30 shirts left. That is an indicator that you need to investigate where the shirts have gone, if they were compromised, lost, stolen.
Inventory on the Balance Sheet
Lastly, the most important reason to maintain an inventory system is to keep accurate records of your business’s assets. For any company, inventory represents the investment. The balance of this investment is shown on the balance sheet. To stick to government requirements for accuracy of financial reporting, businesses are required to make sure that all inventory balances reported on the balance sheet reflect the correct value of all products they have in stock.
TK Accounting & Consulting 