It’s important to keep details on your stuff

Editor’s note: Michelle Stockman is an independent consultant with her company, Fort Smith-based Msaada Group. Stockman earned a bachelor’s degree from Loyola University-Chicago in communications and fine arts, and earned a master’s in entrepreneurship from Western Carolina University. Her thoughts on business success appear each week on The City Wire.

One of the most difficult skills to learn as a business owner is inventory management. Providing products for customers to purchase has its own challenges for some business types.

However, keeping track of the whole picture of inventory is a skill that is not taught in many schools. Whether you are running a restaurant, retail store, plant or even a doctor’s office, knowing how to manage inventory (both raw goods and finished product) is an important skill to master.

Inventory is the physical product that will eventually be sold to the consumer, and it requires the business owner to know how many of what to order and how often the items will need to be replaced. The business owner will utilize the knowledge learned during the business feasibility and planning phase to gauge inventory needs. The business owner will start with their target market research. What is the business looking to sell that would appeal to the customers it is targeting?

Knowing your market size is one step to knowing how much product to order.

The other factor to consider is how often does the business intend to replenish the stock? Some businesses will want to restock inventory on a daily basis while others will seek monthly inventory restocking. Once you know how much to anticipate on a daily basis and how often the business plans to restock the inventory, then the mystery of ordering inventory is less intimidating.

Ordering products is only one portion of the equation. Tracking inventory becomes an important step in maintaining company cash flow. Product sitting on a shelf collecting dust is simply dormant money for a business. The longer the money (i.e. product) sits, the longer the business will wait to obtain that money back to purchase other products.

The not-so-glamorous activity of taking “inventory” is a key tool to monitoring the movement of cash in and out of the business. Likewise, taking a physical inventory count allows the business owner to monitor the theft rate within the business. Taking a physical count of the products allows the business owner to reconcile true product count to any computer records that may exist for the products within the business.

With the harvest of inventory tracking systems and software, businesses can maintain a healthy inventory that allows the business owner to pinpoint what products sell, how long it is taking them to sell, compare seasonal fluctuations and produce reports to help the entrepreneur efficiently run the business.

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Stockman can be reached at [email protected]