Manufacturing Accounting

Inventory management is the process of keeping the right products on-site for sale. Keeping inventory or products on-site lowers shipping costs and speeds up delivery. However, it costs money to buy products and build stock. So, you have to maintain the right level of inventory i.e., products are likely be ordered. If you have too much inventory you will waste resources on unsold products, storage costs and other related expenses. On the other hand, not having enough goods in stock can lead to delays in deliveries and unhappy customers. Of course, just-in-time inventory where you order just enough from your supplier and ship directly to the customer is possible but not always feasible. Therefore, a good inventory management process will not only reduce costs but also improve profits and keep customers happy.

Good inventory management not only needs physical stock management but also requires you to accurately track inventory in your accounting systems. Outsourced Bookkeeping Services can help with the accounting aspects of inventory management. They can help you select the best accounting software that meets your requirements, set up the chart of accounts, set up the correct items and regularly update the Bookkeeping system. This will allow you to focus on your business and on physical inventory management. In this blog post, we have shared some inventory best practice tips that can be a game changer for your business.

Even if you have good inventory management software, you should physically examine your stock of inventory. This will ensure that the physical stock matches the Books. Regular matching of physical inventory vs the accounting system will minimize theft. And detect damages to goods.

Physical inspection of inventory is particularly important for fast-moving goods. Regular inventory checking should include spot-checking to ensure the accuracy of recorded inventory. This will help avoid under and over-stocking issues that can be costly to firms.

Most manufacturing firms face issues in updating purchase orders. The changes may be required after a modification is made in the delivery of an order or quantity ordered. The changes are also required in case of incomplete deliveries or mistakes in entering the order. This results in wrong decisions being made related to ordering goods and making projections.

You need to make rules regarding updating the inventory records. It is important to create daily and weekly processes for updating inventory records. This will avoid a lot of issues related to managing inventory.

Another Inventory Management best practice is to schedule the purchase of inventory whenever required. Scheduling the purchase of goods will help avoid stock-out problems. The benefit of scheduling each month is that it will help you to order only the goods required thereby avoiding issues related to overstocking of goods.

Consider scheduling inventory purchases by creating automatic reorder points. Once the inventory goes below a specific point, the inventory management system will notify the concerned personnel to order goods to avoid stock out.

You can use different inventory management methods to manage the stock. Remember that there is not one method that is perfect for every firm. You need to determine for yourself whether the inventory management software meets your requirements.

You can use the two-bin method, economic order quantity (EOQ), min-max method, and just-in-time inventory to manage inventory. It is important to select a method after contacting a consultant to ensure that the selected method meets your operational requirements.

As an example, the EOQ method may result in a mistake in quantity suggested in situations when the unit sales decrease. In this situation, the min-max method may be better in determining when to purchase goods.

Demand forecasting is important to understand when and what to order. Accurate demand forecasting which will also result in good inventory management. In general, you must store about 1.5 times the average demand for a product.

Many firms use Excel to forecast demand for goods. Using Excel is a time-intensive task to track inventory. You should consider using a good inventory management app to determine the present stock level. This will help you know exactly when to reorder goods based on the demand and what exactly to order. A good inventory management system will automatically forecast demand for goods based on the customer’s buying history. As a result, it can save you time and money!

Features you should look for when selecting an inventory management solution include the following.

Integration with QuickBooks – You must select an inventory management app that supports seamless integration with QuickBooks accounting software. This will help save time in valuing inventory and calculating the cost of goods sold.

Multiple Locations – The inventory management software should also allow you to manage inventory in multiple locations. You should add as many warehouses as required in different sub-locations such as shelves, aisles, bins, and other specific areas.

Scalable Solution – The best inventory management software provides scalable solutions. You should be able to upgrade the package with extra features as your business requirements change with the growth of the business.

Securing the premises is also important to avoid theft and loss of inventory. Consider installing CCTV cameras to monitor access to the area where inventory is stored. Another piece of advice is to issue security tags to monitor and limit access to inventory.

You must take steps to secure the inventory as it will result in reducing the risk of goods being misplaced or stolen. The best practice will ensure that every item in the inventory is properly accounted for with no risk of loss.

Make sure that the high-volume items are easily accessible for shipment. This will result in reduced time in shipping the products to the customers.

The best practice should apply to the top retailers. It will help ensure that the demand for goods is met in a highly efficient manner. Prioritizing the delivery of goods in this manner will create a positive relationship with the retailers.

Manufacturing inventory management is a critical part of efficient resource management. The way the inventory is managed will determine the profitability of the business. Modern manufacturing businesses need to have efficient in-house processes and robust inventory management software.

Inventory loss can be prevented by using technology platforms for making inventory projections and purchase order decisions. The systems will also reduce clerical errors involved in recording inventory-related data.

Consider outsourcing accounting tasks so that your team can focus on efficient inventory management. Contact Maxim Liberty provides professional Bookkeeping services. Our team can handle all your Bookkeeping tasks including inventory accounting. You can get in touch with us today by dialing (703) 957-6938.