How cost control includes your supplies inventory
Growing services-based companies know they need to track their inventory with as much scrutiny as product-based companies. While measuring cost of goods sold may not be their primary concern, simply being able to trust their inventory data to keep costs low and keep their business flowing is.
Spreadsheets help. However, when it comes to tracking more than one changing attribute in real-time, consistency, accuracy and timeliness all tend to suffer within the confines of a manually updated spreadsheet.
Proactively managing inventory by tracking amounts, movement, and orders in real time, brings cost control powers to your supplies inventory, whether it’s finished goods, non-inventory items, parts stored in service vans, hardware that facilitates software implementations, surgical kits, items that go into the kits your teams assemble, or stock of any type. Here’s how:
Tracking Inventory Amounts
Inaccurate inventory amounts are so much more than just annoying. They mess up your service schedule. They lead to expedited shipping costs. And they can upset customers.
Spreadsheet tracking of incoming and outgoing stock works, until it doesn’t. Once the error makes its way through your service or project, you have delays, uncertainty and frustration. And this is for the inventory you are tracking, what about your non-inventory items?
Knowing what you have and where it is helps cut costs in the following ways:
- Eliminate or reduce expedited shipping costs – real-time data as to the amount of an item you have, regardless of location, puts you in a proactive position to place an order with your supplier to have the item in stock prior to depletion or to make a transfer from your other location.
- Lower service costs with fewer return visits – if you treat your services vans as warehouses and actively track the stock of parts in each with real-time automation, you not only avoid repeat, margin-lowering visits to customer sites due to not having a part in stock, you also increase the potential of an upsell sale.
- You can simplify this for Service Technicians with barcoding and mobile data capture. They simply scan the parts they use, enabling them to quickly capture these costs at the point of activity – even when the point of activity is at a customer site.
- Lower marketing costs with increased repeat business – now more than ever, people want things fast. And you know as well as they do, the competition is only a web page away. Waiting for the part or an item to come in doesn’t bide well with today’s consumer or business. Win their continued business by meeting deadlines and completing jobs in one trip.
- Freeing up cash – when you order for one location or warehouse when a simple transfer would be better, or order items which are actually in your storage room, just not on the spreadsheet, your opportunity costs may suffer as your cash is tied up in inventory and not available to invest in other areas of your business.
Tracking Inventory Movement and Status
Is your inventory on hand really on hand? Without visibility to pick, pack and ship fulfillment stages, it’s hard to tell.
How many people does it take to locate your shipment? Are your volunteers’ laptops still at the repair center? At month end, how do you account for inventory that left your east coast warehouse but has yet to make it your west coast facility?
Having accurate and real-time visibility of inventory status and its movement may decrease costs in the following ways:
- True up budgets – allocate the usage of items for true costs on jobs, projects and events.
- Improved customer retention – Customer Success teams, Technicians and Sales teams avoid over promising as they can see the status of supplies and kits, knowing if they are on order, enroute via transfer, or readily available.
- Reduce waste – if certain items or stock have not moved in months, you can avoid ordering something you do not need.
- Thwart theft – if an item suddenly triples in usage, you can spot this and determine the cause.
- Track and properly allocate landed costs – retain visibility on a journal entry level with an “in-transit” status and ensure landed costs are correctly accounted for when transferring items between locations.
Tracking Inventory Orders
Having visibility as to when supplies or a part is to come in helps teams across your company work more efficiently. Purchasing knows when or when not to order and teams will have better insight when scheduling an event or a project. Additionally, consolidating all information around your supplies inventory into one system provides a single source of information, helping teams collaborate and avoid out of stocks so you can keep your business flowing.
Knowing what’s on order and the status of that order can help cut costs in the following ways:
- Avoid customer order cancellations – you can see trends and order within the right amount of time to avoid expedited shipping costs as well as delays in fulfilling service requests.
- Capture vendor savings – if you have multiple locations, you can consolidate orders and meet vendors’ savings thresholds.
- Reduce expenses – order costs can include the costs of your teams placing orders and reconciling the orders with purchase orders. With real-time automation, the entire order cycle can be reduced to entering data only once. Automation flows the data through the entire procure-to-pay process thereby eliminating duplicate orders.
- Cut costs and control spending – tie purchasing to inventory to automate approval workflows and establish controls with thresholds.
When you commit to actively managing your supplies inventory, you are committing to managing costs. With the right inventory management software, automation, real-time data and controlling costs becomes much easier.
Sage Intacct offers Inventory Management software as well as mobile data collection and barcode scanning with its Inventory Automation module. See how you can improve cost control while bringing visibility, consistency, and collaboration to inventory management by contacting us today.
Recommended Next Read
Cash versus accrual accounting: what is the difference?
Subscribe to our Sage Advice Newsletter
Get our latest business advice delivered directly to your inbox.
Ask the author a question or share your advice