rAs the year-end approaches, many businesses will be not only be generating their fourth quarter financial statements, but also looking back on the entire year’s financials. And what a year it’s been. The COVID-19 pandemic and resulting economic fallout have likely affected your sales and expenses, and you’ve probably noticed the impact on both. However, when you look at your post COVID-19 financial reporting, don’t overlook the importance of having a good inventory management strategy and its impact on your financials.
Carrying too much inventory can reflect poorly on a business as the value of surplus items drops throughout the year. In turn, your financial statements won’t look as good as they could if they report a substantial amount of unsold goods.
When looking for ways on how to improve inventory management control, consider taking stock and perhaps cutting back on excess inventory. In turn, this will reduce interest and storage costs. Doing so also improves your ability to detect fraud and theft. Yet another benefit is that, if you conduct inventory checks regularly, your processes should evolve over time. Doing so will increase your capacity to track what’s in stock, what’s selling and what’s not.
One way to improve your inventory management strategy is to perhaps budget for an upgrade to your inventory tracking and ordering software. Newer applications can help you better forecast demand, minimize overstocking, and share data with suppliers to improve accuracy and efficiency.
If yours is a more service-oriented business, you can apply a similar approach. Check into whether you’re “overstocking” on services that just aren’t adding enough revenue to the bottom line anymore. Keeping infrastructure and, yes, even employees in place that aren’t contributing to profitability is much like leaving items on the shelves that aren’t selling.
Making improvements may require some tough calls. Sadly, this probably wouldn’t be the first time you’ve had to make difficult decisions in recent months. Many business owners have had to lay off or furlough employees and substantively alter how they deliver their products or services during the COVID-19 crisis.
You might have long-time customers to whom you provide certain services that just aren’t profitable anymore. Are you afraid that your company might start losing money on these customers? If so, you may have to discontinue the services and sacrifice their business.
You can ease difficult transitions like this by referring customers to another, reputable service provider. Meanwhile, your business should be looking to either one of two options.
As of this writing, the economy appears to be slowly recovering for most (though not all) industries. An environment like this means every dollar is precious and any type of waste or redundancy is even more dangerous.
Take a hard look at your business’ inventory management strategy, or how you’re managing the services you provide. This will ensure you’re in step with the times. We can help your business implement cost-effective inventory tracking processes and assist to gaining key insights from your financial statements.