Inventory Management is one of the most important aspects of accounting and bookkeeping. Not having a good stock control system can cripple one’s business. A Good Inventory Control System prevents theft and unnecessary loss of goods.
It also boosts income, profit and reduces the tendency of overestimating your profit at the end of each month.
Let us give an example. Mr Festus Okey makes N500,000 every month. In January, he made 350,000 profit. When he employed a stock taker, he found out that goods worth N200,000 were stolen and weren’t accounted for. He feels he made a profit of N350,000, but we know that he actually made N150,000 as profit. A business without a system that properly and effectively tracks inventory has the tendency of collapsing in 5 years. Vanguard says that 80% of SMEs fail in their first 5 years. Lack of inventory control serves as one of the reasons why small businesses fail and you should strive to be among the 20% that succeeds.
Let us use an example of a busy business man that sell three products- Canned Beta Malt, Star and Origin and how he was able to prevent goods from getting stolen from his factory.
Mr. Festus Okey sells canned Malt, Canned Star and Canned Origin.
Each week, he buys over 50 of them, but sells some of them daily.
He’s not always around. His boys sell these drinks for him and present a sales report at the end of the day.
Sometimes, when he’s out, his workers sell some canned drinks and keep the money or sometimes, invite some friends. Most times, they offer drinks to their friends and fail to account for it in the report since they are unwilling to pay for them.
Oga is unable to track the number of stock left at each point in time because he cannot be counting all the time.
He’s at the same time, not bothered because he still makes profit but not as much as he used to.
He noticed he was making two times the profit he currently makes when he was working alone and needed to get back as much profit he was getting when he was working all alone. These were the beautiful solutions we presented to him:
NB: This can work for any product-based business.
1. Order a copy of PEFA Solutions’ SME PERFORMANCE TRACKER.
2. Find your way into the Inventory Control Sheet and fill in the opened cells.
3. Start by counting all the stocks left in the shop. Say you have 500 Cartons of Canned Malt, 350 Cartons of Origin and 200 Cartons of Star.
4. Register these opening stocks with a unique code on the tracker.
5. Input your weekly purchases on the tracker as you make them.
6. Using the account presented to you by your workers at the end of the week or month, input your daily sales.
7. Find out the stock left in the shop and their values from the SME Performance Tracker.
8. Count to confirm if you have the same quantity left in your Shop or Factory.
If the two are different, you know where to start from.
Are you currently having issues tracking your inventory, debtors, expenses, income or general performance?
Talk to us now on 09056289995 or 07068309860. You can also contact us at firstname.lastname@example.org
To directly order a copy of our SME Performance Tracker, please visit www.smetracker.pefasolutions.com and get a copy sent to you in less than 24 hours.