Measuring inventory accurately is essential to a success business operation. Without keeping an accurate record, you risk upsetting your customers as well as increasing the cost of carrying more products then your customers need. Ultimately, you will suffer from losing profit. On the other hand, when the goods records are well kept with true accuracy, it contributes to visibility, allowing managers to understand data trends and forecast future demand.
Accurate and update inventory records can inform you when you need to order new items. When under-stocked, you may not have enough products to send to customers. Meanwhile, if you overstock, your warehouse might be overcrowded, leading to disorganisation. In some cases, overstocking perishable items can lead to waste. Failure to properly track your stock could eliminate any earnings your business would have made from this business transaction. Analysing inventory records over a length of time can help you track trends to predict what items typically sell faster than others.
Lack of accuracy inventory record, it can create chaos. The chaos may create a snowball effect on client orders. Customers expect a certain level of service when they place an order. If you fail to meet clients’ expectations or do not have enough inventory to deliver. This is not only upsetting customer, but have a negative effect on the relationship. Probably this may cause customers to pull future orders. In addition, unsatisfied customers may spread negative message with their peers. Therefore, if you have an accuracy stock record, you can keep high customer satisfaction.
keeping an accurate inventory record may allow your staff to devote more time to other areas. Working with inaccurate records can be time-consuming, but accurate records means your staff can work on improving certain aspects of the status-quo inventory process to improve productivity and efficiency in new ways.
Businesses do not update their Balance Sheets and Profit and Loss reports may fall behind in reporting their financial operations. Having a outdated inventory information, it results in incorrect stock cost values and inaccurate profit reporting.
To ensure your business’ inventory is accurate and up-to-date. You might need to adapt a tracking practice. For example, you can simply use a excel file with 3 separate pages to book: Purchase record, Opening record and Sales record. Then you need to record every transaction manually. And deduct the number of sales from opening balance + purchase. Then you will get the accurate inventory balance.
If the calculation is still confusing you. Please engage us for your accounting work, we’ll guide you through the whole process.
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You may want to read: CHECKLIST FOR ACCOUNTING AND AUDITING IN HONG KONG