What Is Inventory Management?
Keep track of your inventory.
Inventory management helps companies identify what and how much stock they need to order. It helps keep track of stock right from it’s purchase through to the sale of goods. The practice helps identify and respond to trends to make sure there is always enough stock to fulfil customer orders and give warnings when there might be a shortage.
Once you’ve sold it, your inventory becomes revenue. Before it sells, inventory (although reported as an asset on the balance sheet) ties up money. Therefore, having too much stock costs your business money and reduces cash flow.
One measurement of good inventory management is inventory turnover. An accounting measurement, inventory turnover reflects how often stock is sold in a period. A business does not want more stock than sales. Poor inventory turnover can lead to deadstock, or unsold stock.
Why Is Inventory Management so Important?
Inventory management is imperative to a company’s good health because it helps make sure there is always just the right amount of stock on hand, limiting the need for back-orders and the risk of stock outages.
So, what is inventory?
Inventory is the raw materials, components and finished goods a company sells or uses in production. Accounting considers inventory an asset. Accountants use the information about stock levels to record the correct valuations on the balance sheet.
Inventory or Stock
Inventory is often called stock in retail businesses: Managers frequently use the term “stock on hand” to refer to products like apparel and housewares. Across industries, “inventory” more broadly refers to stored sales goods and raw materials and parts used in production.
Some people also say that the word “stock” is used more commonly in the U.K. to refer to inventory. While there is a difference between the two, the terms inventory and stock are often interchangeable.
The Benefits of Inventory Management with Birdy
You need an inventory management system that can grow with your business.
With automated replenishment, multiple locations and more, Birdy gives you a fantastic inventory management solution that is the perfect fit for businesses of any size.
Learn more about how Birdy can help you manage your inventory.
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