Businessmen dread the word 'Inventory'. For them, it only means one thing, lots and lots of counting. Thus this activity takes place in SMEs only at end of the year by counting up all their physical product and making sure it matches what's on the books. These days, businessmen have understood just how important solid inventory management is. Inventory is a placeholder for money. You paid money for your inventory, and you’ll get that money back (and then some) when you sell it. Holding inventory ties up a lot of cash. That's why good inventory management software is crucial for growing a company. Just like cash flow, it can make or break your business.
A study performed by Entrepreneur Magazine found out that businesses can increase their profitability by as much as 50% by using inventory management software to manage their business. The benefits of the inventory management application in the day-to-day operations of a business far outweigh the costs of purchasing and learning how to use it. Inventory management software also provides actionable insights regarding your customer activity, as well as orders, sales, and delivery information. In fact, inventory management software is one of the best ways to increase your business’s profitability and sales.
Here are five ways inventory management software increases profitability and sales:
1. Controls inventory in an effective way
A common challenge amongst Indian manufacturers is to maintain the level of stock at a profitable level. More often than not, businesses find themselves spending too much money on excess inventory due to poor inventory management. If not corrected, it can be detrimental to the long-term profitability of the business.
Overstocking goods means having too much money tied up in inventory, which negatively affects both a business’s cash flow and its profitability. However, understocking goods is also a problem. When a company has shortages of a certain product — especially if it’s in demand — they will miss out on sales because their customers end up looking elsewhere to buy those products.
To gain better control over your inventory, you need high-quality inventory management software. It can help you prevent both overstocking and understocking of your goods by providing you with increased visibility over all your stocks. Using the software, you can get accurate real-time access to inventory information at any time no matter where you are. This means you can easily keep an eye on the levels of goods. You can even set up alerts to let you know which of your stocks are running low so that you can replenish them before they completely run out.
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2. Reduces unnecessary business expenditure
One of the more significant expenses of your business is undeniably its staffing costs. Inventory management software acts as a tool to streamline your business processes. You no longer need to employ people to handle countless excel sheets, because it will all be taken care of by a single inventory management software.
Unnecessary business expenses due to human error can also be avoided by using inventory management software. It integrates with technology that automatically and accurately updates your inventory data. The use of proven software maximizes accuracy which is essential when it comes to inventory management. This reduces the risk of losing profits over something that can be prevented.
3. Improves Order Fulfillment
Order fulfillment refers to the movement of your goods. That is, from the point you receive an order, right up to the moment they are delivered to your customer. Here’s how the process goes for most wholesalers and manufacturers.
- The manufacturer receives the customer inquiry.
- The manufacturer sends a quotation against the inquiry to the customer.
- Customer sends PO to the manufacturer.
- PO is converted to a work order and sent to the store team.
- The store team checks the inventory if they need to order new raw material
- If yes, then the Purchase team issues a PO to the supplier of raw material.
- Purchase team hands inventory to store team.
- The manufacturing team uses inventory for production.
- Product is dispatched
Plenty of businesses, especially smaller ones such as start-ups, still prefer to do this entire process manually because they think it saves them money. However, as previously mentioned, this isn’t true at all. Manual work creates room for error, and with errors come unexpected costs.
Inventory management software provides you with a real-time view of each and every order, as well as what stage of the process the order is in. You can check whether an order has just been received, shipped, or invoiced. It eliminates boring manual data processing and replaces it with automatic data updates. Inventory management makes your workflow more efficient by integrating all the data so you can track orders, prepare invoices, send customer notifications, and accept customer payments within one system.
4. Plan For Growth
Planning for the future is one of the most important tasks of a business owner. You need to think about growth, but you also need to consider potential lean times, especially if you sell or manufacture seasonal products.
With inventory management software, you can easily plan for your growth and scale your business the right way. As you won't be spending all your time in inventory management you'll get time to explore new markets and diversify its products.
5. Enhances customer experience
When it comes to manufacturing or wholesale, it literally pays to keep existing customers happy. Businesses have about a 60% chance of selling to existing customers versus a slim 5% chance of selling to new customers.
Maintaining the loyalty of your current customers is critical because they will be more recommend your business to other businesses, and therefore provide you with new customers.
So, if you want to keep your customers happy, one thing you can do for them is to make buying from you easier and even enjoyable. How do you do that, you ask? The answer is simple: use inventory management software. How will it help you? You'll be able to deliver the end product at whatever estimate you gave the customer since you'll have real-time access to all inventory data.
Remember that with an effective inventory management system in place, you can help reduce costs, analyze sales patterns and predict future sales, and prepare the business for the unexpected.
With a proper inventory management system in place, a business has a better chance of profitability and survival. TranZact is one such platform. It will do all the hard work for you by keeping an up-to-date inventory, which shifts every time a sales or manufacturing order comes in. There’s no need to be modifying data every time an order comes in because the system does that for you.
TranZact is a platform for SMEs to digitize business processes right from customer inquiry to dispatch. We want every Indian SME to use our software product without having to think over silly amounts of money i.e. truly free. But, just being free will NOT be enough. Our product needs to add immense value to our customers and our support has to be available 24×7–365, with a commitment towards absolutely delighting our users. Then only ever do we look to monetize at that junction where our customers derive value and benefit.
It’s time to take control of your inventory management and stop losing money. Choose the right inventory management techniques for your business, and start implementing them today.