Online Inventory Management
Inventory Management Best Practices
Take a Periodic Physical Inventory and Make Adjustments
For various reasons, your actual inventory quantities can get out of sync with the quantities stored in your inventory management system. This could happen through spoilage, breakage, theft, or data entry errors. It’s a good idea to schedule regular physical inventories of your products to make adjustments to your inventory system so the quantities stored there match your actual quantities. Most business determine the frequency based on their volume and how closely they want to keep an eye on overages and shortages; some choose a monthly schedule, others quarterly and even some yearly.
Write-off Breakage or Spoilage as it Happens
If you experience frequent breakage or damage of your products or your product has a short life span and you deal with spoilage, keep a clipboard in an easily-accessible location so you can write down important information about your unsellable goods, like the product name, how many units you lost, why you can’t sell them and the date you pitched them. Periodically and before your take a physical inventory or close your books for a period, adjust the available quantities of your products in WorkingPoint to get the unsellable products off your books. This will keep your inventory quantities current, your inventory valuation accurate, and reduce your tax liability.
Review Your Available Quantities Before Placing Orders
If you filter the WorkingPoint Items List to include only Inventory Items, you’ll have a Stock Status Report: a list of all the products you keep in stock along with their current available quantities (what WorkingPoint says you should have in inventory). Review the list online or print it out to see what you need to reorder from your vendors.
What is Inventory Management?
Inventory management can mean a lot of things, and can differ in meaning depending on the type of business. It can cover everything related to the purchasing, costing, pricing, storing, selling and caring for physical goods. Key components of a successful inventory management approach include the ability to:
- Purchase Products & Automatically Increase On-hand Quantities
- Sell Your Products & Automatically Decrease On-hand Quantities
- Track & Monitor the Sales of Your Products
- Know How Much Product You Have On-Hand
- Track the Cost & Value of Your Products
- Handle Your Cost of Goods Sold For You
- Adjust Inventory Levels Manually
Why should I manage my inventory?
For people who run an inventory-based business, that is—you make or buy a product and store it until a customer purchases it—inventory management is a big part of your operations. As a small businesses owner, you probably can’t afford to tie up all your cash in inventory so you may operate on a just-in-time inventory basis—you order products to fill immediate orders with some backstock and you reorder frequently.
To manage your inventory efficiently, you need to know what you have on hand so you don’t oversell or overpromise your goods to your customers. You also need to know what you don’t have or are running low on so you can make or order more.
Plus, you need to know the cost of your goods so you can price your products competitively and be profitable, and know the value of the inventory you have on-hand and your cost of goods sold so you can accurately determine your profit and compute your taxes.
How Do I Manage Inventory in WorkingPoint?
By using WorkingPoint for online inventory management, you will have the real-time information you need to make the best buying decisions for your business. WorkingPoint will help you track your current on-hand quantities of your items so you know what you have to sell and what you need to reorder, the average cost of your items, the total value of what you have on-hand and the cost of goods sold (what it cost you to sell your items).
Purchasing Inventory
When you purchase a product from a vendor and they provide you with a bill to pay them later or a receipt, record the product information such as the cost of the item, and how many you purchased. Behind the scenes WorkingPoint will:
- Add the quantity to your Available Quantity
This keeps your inventory counts up-to-date so you always know what you have on-hand.
- Adjust Your Average Cost, if necessary
The prices you pay for products fluctuate over time. The average cost method is one of the simplest and most widely used form of tracking the average price you paid for your products. When you use WorkingPoint, we’ll track the average cost for you automatically, so you can focus on improving your gross margin instead of spending time calculating costs.
Selling Inventory
When you sell your products, simply add the product to the invoice and WorkingPoint will:
- Let You Know How Many Units You Have Available to Sell
You don’t have to check the shelves and try to remember what you already sold but haven’t shipped yet before accepting an order. We’ll tell you what you have on hand when you write up your quote or invoice.
- Reduce the Quantity Available to Account for What You Sold
This keeps your inventory counts up-to-date so you always know what you have on-hand.
- Track Your Sales
WorkingPoint records the total sales price for the products you sold in the Revenue accounts you choose for each product. So when you run your Income Statement report, you can see the value of your sales by account. You can also use check the dashboard and see what your Top Sellers are by quantity and revenue.
- Track the Cost of Sales
When you sell a product, WorkingPoint also records the cost of sales for the product automatically. WorkingPoint includes an account to track this value called the Cost of Goods Sold (COGS). This account keeps track of how much it cost to sell your items whenever you sell inventory. The benefits of recording COGS is that when you run an Income Statement, you can see your actual Gross Profit—what you really made from your sales after taking into account what it cost to buy the goods sold.
As you record the comings and goings of your products through bills and invoices, WorkingPoint’s inventory management software will keep your product records updated. Keeping accurate inventory levels is important to managing your business: it means that you’ll know the value of the inventory you have on hand, which is important to the IRS. You’ll also know what you have on hand, which is important for managing customer orders and your cash. Finally, you’ll know your cost of sales, which is important for knowing Gross Profit and reducing your tax liability since COGS is deductible.