One of the most important tasks of inventory management is conducting counts. It may seem pretty straightforward, but if it’s not done correctly, it could significantly impact your organization’s bottom line. To help improve the chances of a smooth and uneventful inventory count, we thought we’d dedicate a few blog posts to the cause. To kick things off, let’s begin by taking a look at some of the main reasons why this task must be performed.
Maintaining Stock Levels – One of the main reasons inventory counts are necessary is to ensure that the business maintains an adequate stock level. Too few of something and you’ll risk running out. Too much and you’ll have money tied up in what’s collecting dust on the shelves. Cycle counts provide a clear picture of what’s available so inventory can either be restocked or rotated out.
Tracking and Valuing Assets – When people think about inventory, they often forget about the important component of assets. Whether it’s vehicles, computers, equipment or property, understanding what assets you have, where they are, how they’re being used and – most importantly – how much they’re costing your company is an essential part of maximizing cash flow.
Managing Demand – If your organization happens to be affected by changes in demand due to things like time of year, season, holidays or other fluctuating factors, ensuring that your inventory levels are where they need to be to meet those demands is critical. Conducting counts prior to these fluctuations and comparing to past data can help you prepare accordingly.
Loss Prevention – Simply put, when employees know that inventory isn’t regularly accounted for, the risk of shrinkage due to theft will inevitably increase. As will potential damages due to careless warehouse workers. Keep your personnel honest and on their toes by staying on top of inventory counts on a regular basis.
Accounting – Your inventory is part of your assets, which means that come tax season, whatever you’ve got on hand will need to be accounted for. Rather than scurrying around at the last minute, conducting regular inventory counts can help you be prepared to hand over accurate data to your accountant.
Insurance – What would happen in the event of a disaster at your warehouse, such as a flood or fire? In order to be compensated for your loss by your insurance company, you’ll need to be able to prove how much inventory you had on hand as well as its value. Routine cycle counts can help make this difficult process go more smoothly.
Business Decisions – Lastly, conducting inventory counts can help key decision makers in your organization determine things like what new equipment may be needed or whether a relocation to a larger facility might be in order.
As you can see, there are many different reasons a business may engage in an inventory count, most of which directly impact the bottom line. In our next post, we’ll delve into the types of inventory that should be routinely counted. In the meantime, if you need assistance with any component of your inventory management activities, give us a call. We’re happy to help!