The following are 12 Greatest Tips That Will Help You To Manage Stocks And Inventory In Your Small Business:
- Requisition for stocks
- Taking of delivery of supplies.
- Manual recording of stocks
- Computer software recording of stocks
- Product pricing
- Stocks control
- Sales management
- Periodic stock counts
- Last In First Out
- Display of stocks
- Reshuffle your stocks
Stocks and inventory are the most important assets of your business. This is because, in most businesses, stocks and inventory take a large chunk of your business capital.
Remember that without stocks there will be no:
- business growth
This is where stocks and inventory control becomes imperative to ensure that customers get their needs and that you too do not suffer any losses due to poor stock management.
This article is, therefore, focusing on the various roles you need to play to ensure effective stocks and inventory control in your business.
Stocks management: Purchases requisition
Stocks management in your retail business begins with purchase of merchandise.
You can source for stocks from reliable and reputable suppliers.
Beyond that, you should be able to anticipate what your customers are looking for and place orders for them.
As an additional guide, if customers ask for any item you do not have in the store, you should write the item down in a notebook.
Consequently, when next you want to place orders for merchandise, such items can be included in the local purchase order.
Furthermore, this way, you can also begin to take note of the demand patterns and preferences of your customers.
Most importantly, your local purchase order should be written in clear terms, showing product specifications, colors, sizes and other details.
Taking delivery of Stocks
You can personally take delivery of merchandise from suppliers.
Often times, there are reports of instances when suppliers have failed to supply completely and completely items requisitioned for by business owners.
In particular, you should make sure that the:
- delivery comply with the specification in terms of quantity and quality as specified in your local purchase order [LPO]
- stocks have no defects
- prices are as agreed with the supplier
Furthermore, if you detect any differences between what you ordered and what was delivered to you, you should complain to the supplier immediately.
In other words, you should ensure that all the items in the waybill/invoice are correct before you sign the delivery note.
Thereafter, you can return the products to the supplier and ask for replacement[s].
Alternatively, if the supplier do not have the item in the store, you can ask the supplier to credit your account with the value of the items not supplied to you.
The amount in the credit note should be subsequently deducted from the invoice from the supplier.
Recording of stocks
To Manage stocks effectively and efficiently in your business, you should be able to record items supplied to you in appropriate records.
Stocks Records keeping can be done in either of the following two ways: manual method or the use of computer software.
Manual stocks control
One of the ways you can manage stocks in your business is by using the rather old fashioned way of recording stocks manually.
With this method, each stock will have its own separate stock card.
Additionally, each stock card can be updated manually as supplies are received as well as when sales are made.
Furthermore, the stock cards are usually placed beside each stock item on the counter.
Some disadvantage of this method are that it is:
- time consuming
- prone to mistakes.
This method can be suitable if you are selling large items such as motor vehicles, cement and similar products.
Therefore, it is not recommended for use in a retail business where you sell many assorted little stock items.
Stocks management: Computer software
A much more modern method you can use is stocks management computer software.
Computer based computer stock control can be used to determine:
- the minimum stocks levels,
- economic re-order levels
- buffer stock levels
- the balance of each item.
Using computer system has the following valuable advantages:
- ease of doing business
- saves time
- cost effectiveness
- higher efficiency
- ability to handle high volumes of transactions in record time
- ensures that you are not carrying excess stocks.
Furthermore, using stocks management software will help you to ensure that your customers are happy doing business with you.
Most importantly, this system will ensure that customers do business with you seamlessly, thereby giving them reasons to come back to you again.
Product pricing management is an ongoing task you cannot not treat with kids gloves.
It is an important marketing strategy you should pay constant and special attention to.
When fixing the prices of your stocks, you should remember that price is the concept of product pricing is nothing but an estimate of what potential customers will be able and willing to pay for your product.
In the first place, if you price your products too high, you will scare away your customers.
On the other hand, if you price your products too low you risk trading at a loss.
Most importantly, you should constantly get feedback from consumers on how they are responding to the prices you have set and compare them with the prices ruling in the market.
Therefore, you should strive to ensure that the prices of your products are neither too high nor too low.
Stock management is the practice of ordering, storing, tracking and controlling stocks.
It simply means ensuring that you do not carry excess stocks that could tie down your capital.
And efficient stock control system should ensure that you are:
- carrying only stocks that your customers need.
- track the movement of your stocks.
This is because, in recent past, there have have been reported cases of unreliable employees:
- recycling stocks back to the supplier even at half their prices
- converting to their personal use the proceeds from their fraudulent practices.
This sort of practices are common in business where business processes are not computerized.
Therefore, you should take steps to computerize your business processes as soon as possible.
Periodic stock Counts
You should embrace the idea of conducting periodic stock counts, say twice in a year.
There are many benefits of implementing periodic stock management in your business.
Some of them are that you will be able to:
- know the value of your stocks
- prevent stealing of stocks
- detect stocks that are nearing expiry dates
- stocks that needs to be written off.
If you cannot do the periodic stock counts yourself, you can get external auditors to help you monitor the exercise.
The immediate benefit of using external auditors to do periodic stock counts is that it will put your employees on their toes and let them know that are on top of your game.
Stocks management: Sales
Sales management simply refers to the process of:
- developing a marketing team,
- leading a marketing team,
- coordinating sales activities and
- implementing sales techniques
- predicting demand
- setting quotas, and
- evaluating performance.
Last In First Out (LIFO)
Just in case your business involves the sales of perishable goods, you can use the principle of Last In First Out (LIFO).
The use of LIFO is particularly recommended for use in the case of:
- perishable products
- merchandise nearing expiry dates
- items prone to damages.
Stocks management: Display of stocks
Stocks display is an essential part of stocks management.
Your stocks should be conspicuously displayed in such ways that they can easily capture the attention of customers.
Furthermore, you should pay particular attention to how you showcase your products:
- on the shelves,
- window displays,
- ‘A’ Signage and so on.
You should remember that people are moved by what they see.
In other words, the way you display your merchandise will go a long way in making customers to make impulse purchases; i.e. buying things they never planned to buy!
Reshuffle Your Stocks
You should regularly move your stocks around from one location to another.
Although there may be some advantage in keeping some stock items in particular locations in the store, it is better to rotate or reshuffle your stocks frequently.
For example, you should:
- bring to the front, old stocks that have remained dust ridden at the rear of your store for a long time.
- let customers know that have such items in your store
- be surprised at the rate customers will pick up those stocks that you probably have considered dead stocks
In conclusion, to manage stocks in your retail business, you should remember that high sales is crucial to the success of your business.
Without sales there will be no cash. Without cash your wallet will be empty.
Therefore, you should not leave sales to chance.
By Samuel Ijenhi
B. Sc. Accounting [University of Benin]
Benin City, Nigeria.