Cash flow is significant in the success and proper running of a business. Without proper cash flow, businesses find themselves in trouble with their financial obligations. Therefore, finding ways to boost cash flow is as important as other business elements like marketing. Doing things like understanding how do credit cards work is important for boosting business cash flow. Smart inventory management is also an important way for businesses to boost their cash flow. This post will focus on this element.
What is smart inventory management?
Inventory management is the process that enables a business to oversee and control the flow of goods from the manufacturer’s/ supplier through to the consumer. It deals with receiving, tracking, and storing products that a business holds. So, smart inventory management involves using modern technology and techniques for inventory management.
A smart inventory management system helps a business deliver streamlined operations by providing real-time insights, minimizing situations like overstocks and stock outs. This system is normally equipped with smart sensors for inventory tracking to reduce human errors and inaccuracies, while improving order fulfilment.
Impact of inventory management on cash flow
When it comes to running a product business, inventory is critical. A business needs enough stock to fulfil product orders. If there is insufficient stock, a business risks missing sales, not satisfying customers, and even losing clients. Overstocking is also a risky element in business because it can tie up the cash when products sit on shelves for a long time. This may cause a business to sell the products at discounted prices to keep them from going bad or out of style on the shelves. This can affect the cash flow of a business. Inventory management means being able to predict how much product you need to avoid running out of stock. Proper inventory management, through smart technologies, can help maximize a business’ cash flow by offering the advantages below:
- Reducing the costs of inventory holding
- Freeing up valuable cash that can be applied for business growth and debt clearing
- Improving customer satisfaction
- Providing a competitive edge
Smart inventory management techniques to help boost business cash flow
Below are some techniques for smart inventory management that can boost business cash flow:
- Using smart inventory management software – this is a tool that helps your business track inventory levels, forecast demands, and make orders depending on the current levels.
- Demand forecasting – This involves accurate predictions of future product demands for a business. Accurate forecasting can help ensure that there is enough product to fulfil orders and not too much that sits on the shelves and restricts cash flow.
- Safety stock – a business needs to have some extra inventory on hand to cover unexpected orders or delays in future stock deliveries. A business can determine the safety stock needs to be based on-demand variability, the lead time for deliveries, and the cost of holding inventory and stock outs.
- ABC analysis – this is a smart inventory management technique that ranks products in the inventory according to how important they are to a business. This gives a business better insight on specific inventory items. In this technique, items in the A category are of significant value, followed by B items, and then C items. This categorization helps a business with prioritizing items to purchase and determine the quantities needed.
- Batch tracking – this is a smart technique that allows a business to track groups of similar products throughout a supply chain. It is important for managing perishable inventory items or ones that can be recalled.
Conclusion
There are dozens of smart inventory management techniques that can promote better cash flow in a business. The techniques a business applies are dependent on its size, types of products, demand, and cash flow needs. Therefore, understanding the needs of your business is essentially crucial for developing and implementing smart inventory management techniques that can boost cash flow.