Inventory control is an essential part of running a profitable business. If you don't know what inventory you have, you can't anticipate demand. You won't know if employee theft is happening and you'll have trouble getting the maximum depreciation deductions on your taxes. There are many, many reasons to take stock of your inventory on a regular basis.
When Should You Schedule Inventory Checks?
Different kinds of inventory checks should be scheduled at different times of the year. Before the holiday seasons, you should schedule an inventory check to see how much you should order for the upcoming rush. You should schedule a check before tax season, usually at the end of the month of your fiscal year.
In addition to "special case" inventory checks, you should also have checks scheduled regularly. This will help you spot buying trends, as well as catch employee theft early.
What Should You Check When Taking Stock?
Here are a few of the things to look at when you're taking stock of your inventory:
* Are there items that continually don't sell? If you notice items sitting on the shelf for a long time, it might be time to discontinue those items.
* Are there items that are selling very quickly? Not only should you restock these items, but you should also consider promoting them harder, as there's a lot of demand in the market.
* The raw number of items you have. At the most basic level, that's what an inventory check is about.
* The asset value of your inventory. This helps for accounting, as well as to know how much of your capital is tied up in inventory.
* The amount of raw materials. If you make products on site, this is important to know.
* Expiration date of your inventory. Try to use up inventory that's going to expire first.
* Any missing items. If you notice missing items, it might be time to consider anti-theft policies.
Managing Stock Levels
Once you have a clear idea of where your stock levels are, the next step is to develop good stock management policies. It could be useful to talk to your employees during this process, as they tend to have a lot of first-hand experience on what is and isn't selling.
There are three main goals to stock level management:
1) Stock more of what's selling so you don't sell out.
2) Stock less of what isn't selling.
3) Stock as little as possible to free up capital.
It helps to design these processes yourself, but eventually you want to be able to hand off all your stock management programs to managers and employees. When you do, make sure the different purposes of inventory checks are clearly explained.
Be Wary of Adding a Covid-19 Surcharge to your Business
What Small Businesses can do to Survive the Pandemic
How the Pandemic is Affecting Canadian Businesses
Will Covid-19 Relief Measures Affect my Taxes?
How to Manage Flexible Work Arrangements for your Business
Planning for the Future of Your Business
Charging PST on Online Sales
How to Close your GST Account with the CRA