Any business that sells goods will likely implement some form of inventory management to maintain adequate product quantities. But many may be unaware of how this process is linked to financial management, or how to successfully integrate these activities.
Some businesses still rely on traditional stock control, without knowing the benefits of Cloud inventory management (which include greater effectiveness, accuracy, real-time insights, and more detailed financial analytics).
In this article, we break down the steps involved in inventory management for businesses, while highlighting the capabilities of inventory management software. We also cover the specific benefits of Cloud inventory management for finance teams and explain how to integrate this crucial activity with accounting processes.
What is inventory management software?
The management of inventory involves knowing what needs to be stocked and when it needs to be stocked. Businesses should know what is in their warehouse at any given time, as well as where specific items are located. By maintaining an optimum level of inventory, they can avoid unnecessary costs and meet the demand of customers.
With Cloud-based inventory management, stock levels can be monitored online, meaning items can be tracked as soon as they enter or leave your premises. Cloud technology can be accessed from any place and at any time, ensuring inventory data is always up to date (thus eliminating many of the problems associated with traditional methods).
What are the stages of inventory management?
Inventory management has multiple stages, all of which can be tracked using a Cloud financial management system.
Of course, these steps may occur in a different order and some not at all. It depends on the type of company and the production method deployed.
Let’s use the example of a company that produces / sells electronic goods, to illustrate the stages of inventory management a business might need to track:
- Purchase raw materials – The first step in inventory management is the purchasing of raw materials from your trusted suppliers. For electronics companies, this may include metals such as gold, copper, lithium, and aluminium. Or plastics, and even chemicals.
- Store raw materials – Once raw materials have been received, they need to be sorted and stored, usually within a warehouse. While here, these materials will need to be accounted for.
- Begin production process – Materials are then moved to a factory so that the production process can begin.
- Store finished products – Products that are ready to be sold will then be stored once more in a warehouse. This is often a separate location to raw materials, which can cause logistical challenges. This highlights the importance of being able to monitor and track inventory using Cloud financial management systems.
- Receive customer order – A sale will then be made, either online or in-store.
- Deliver product to customer – The goods that have been ordered will be sent to the appropriate customer address. Therefore, it’s crucial that stock numbers are as accurate as possible.
- Replenish stock – After a sale has taken place, inventory may need to be replenished (if stock numbers have fallen below a certain threshold). The replenishment threshold could be determined by historic demand. During this process, numbers should be monitored and updated accordingly.
- Update finances – This is perhaps the most important stage for finance teams. When a financial transaction takes place (whether it’s cash received or money spent), this activity should be reflected in the financial management system. The most efficient way to do this is to integrate inventory management and financial management, so that updates can happen automatically.
Given the amount of inventory / financial data involved with this process, it’s easy to see why a Cloud inventory management system is the preferred method.
What are the benefits of Cloud inventory management?
These are just some of the benefits brought about by Cloud-based inventory management systems:
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Greater visibility
All members of your team can monitor product orders and inventory levels, with the ability to work from anywhere. With Cloud inventory management software, you can access stock and sales data at any time.
The Cloud requires an internet connection to work, but many systems can still be updated when offline too. In this scenario, the changes would synchronise as soon as an internet connection has been re-established.
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Fewer mistakes
Cloud inventory software reduces instances of human error because many tasks become automated. Due to users having instant visibility of the latest updates, duplication is largely eliminated too (which might otherwise be a problem when multiple teams are involved with the process).
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Better customer outcomes
Customer service is an essential component of any selling business’s success. If stock has been maintained appropriately (with inventory management in the Cloud), customers can receive products in good time when they have made a purchase. Sophisticated systems make it more likely a product will be delivered to the right address too, while ensuring the process is as streamlined as possible (particularly for customers that order with regularity).
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Automated processes
Businesses can make quick and informed decisions when they achieve stock control automation. If much of the supply chain has been automated, there’s minimal need for human intervention once an order has been placed.
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Increased security
The latest security features are often included with Cloud inventory management systems, making them more secure than traditional solutions. Although, this is of course dependent on the competency of the provider. Cloud security is particularly important for businesses that hold sensitive data relating to customers or finances.
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Scalable processes
Cloud computing allows small businesses to scale their inventory management, accommodate increased sales / inventory, and handle an increase in system users.
The importance of inventory management for finance teams
With so many benefits, it’s difficult to overstate the importance of good inventory management. For finance teams in particular, Cloud-based inventory management can provide even further benefits:
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Reduced costs
By analysing sales trends over time, it becomes easier to manage inventory, as it’s clear how much stock should be on hand throughout the year. This means that spend on materials will only occur when it’s absolutely needed. And all materials will eventually be sold as part of a finished item. Excess stock doesn’t just lead to unnecessary production and storage costs, it can also lead to wasted goods.
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Healthier cash flow
When you combine good inventory management with reduced costs and consistent sales, there is inevitably more fluid cash flowing through the business. This cash can perhaps be invested back into the organisation to make processes even more efficient.
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Higher profitability
With inventory management software it’s far easier to uncover which products are performing best, and which are selling poorly. As a result, the company can stock accordingly, and focus more of their resources / attention on the high performers, to boost profitability.
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Improved data quality
One of the biggest challenges in inventory management is data accuracy. Calculations can take up a lot of time for employees. Sometimes they may have to go over stock numbers many times to ensure everything is correct. And when considering the related financial data, there can be a lot of cross-checking. When using integrated Cloud-based software this is all automated as processes are interconnected.
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Enhanced decision-making
Inventory control and planning solutions give businesses the ability to gain valuable insights around product performance. As a result, the product portfolio can be changed as and when needed. Decisions like this become far more informed as they are driven by accurate data.
Improve your business operations with Cloud-based inventory management
At Advanced, we provide a Cloud-based accounting solution called Advanced Financials. Although primarily a financial management system, it also has sophisticated inventory management functionality.
The system provides clear visibility of stock levels across multiple sites. It helps to tackle repetition by predicting when recurring orders need to be placed. Collaboration with the warehouse team becomes easy with seamless pick list integration, as well as SKU and order fulfilment capabilities. Aspects like replenishment levels can be automated too, and tricky calculations become simple.
As Advanced Financials is an all-encompassing FMS, all sales and stock information can be incorporated into the wider financial picture, to provide a current view of financial health and performance. Financial data becomes as complete as possible, ensuring the finance team can helpfully contribute to strategic decision-making within the business.
Does your business have stock control needs? Take advantage of the benefits of Cloud inventory management with Advanced Financials and integrate your inventory management / financial management activity.
