Business owners must stay on top of their inventory since it typically represents one of their top business expenditures. Inventory planning and control are essentials as it’s imperative to determine how much product should be kept on hand to meet the demand. Product control is the process used by managers to count and maintain products. There are many benefits to maintaining good inventory planning practices. Here are the top three likely to positively affect your business.
Good Practices Limit Abuse
Having clearly stated policies and procedures regarding on-hand inventories can prevent it from being abused by employees. When work environments are too loose, employees can easily steal products for their personal use. Employee theft can result in hefty financial losses for the company. Employees sometimes even use products in their workplaces for personal reasons. When some products are opened or used it may be unsellable costing the company more money. Managing employee behavior through policies can increase cash flow and profitability.
Increased Profits
Having a solid inventory planning and control practices can generate higher profits for your business. Simply purchasing the right types of products to meet real customer demand can lead to increased business profit. Some companies sell through their products several times a year. Having a workable plan and taking control measures can limit obsolete products. Non-moving products have to be disposed of and oftentimes written off which is interpreted as a loss on income statements.
Improved Cash Flow
Creating a plan and implementing control measures can help manage cash flow. Policies and procedures also limit the amount of money spent on on-hand products. Improved cash flow can also occur from buying lower cost products when they are available. Lower-cost products save money, as well as giving the company a cost advantage in the marketplace.
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