There are many things to do when you run a business, even when your business exists solely online. Of all the tasks that you’ll need to perform, physical inventory counts are among the least desirable. As such, many companies don’t take inventory nearly as often as they should, which can lead to serious trouble and the loss of lots of profit. Below, you can learn more about it and how to do it the right way.
Why Failing to Take Inventory is So Devastating
When you aren’t counting the products in your warehouse often enough, it can create numerous problems for your business. Of these, the worst by far is a faulty inventory projection. When you don’t know how much you have on hand – exactly – then you can’t really know what you’re selling, either. This can lead to a massive overstock – or even an understock – that can devastate your reputation with your customers and lead to the failure of your business. Physical inventory counts are meant to curtail this and ensure that you always have the perfect amount of products in stock.
The Most Common Methods: Annual and Seasonal
Many, many companies out there perform annual physical inventory counts, and while they are better than not performing inventory counts at all, it simply isn’t always as effective as it should be. For most companies, annual inventory counts are more for tax purposes than for projection reasons. That’s why other companies prefer a large and thorough seasonal inventory count. Once each season – four times each year – they will count the physical products on warehouse shelves. Not only is this much easier than one annual count, but it’s also far more precise, and it allows businesses to accurately predict sales.
Cycling Your Inventory
Depending on your business, you might also want to consider utilizing the cycle method when it comes to taking inventory. Essentially, this means dividing your warehouse into segments and inventorying one section every couple of weeks. This makes the job much quicker and simpler, and when the end of the year rolls around and you need documentation for tax purposes, you’ll already have it in hand. It may sound daunting, but there’s enough technology out there now to make cycling inventory counts relatively painless.
Outsourcing Inventory Management
Of course, if the idea of managing and counting your own inventory seems too daunting for you, there’s also another option: outsourcing. When you outsource your inventory, you can get regular reports – often weekly – about what you sold and what you have in stock. This is an amazing way to stay up-to-date, and it requires virtually no work at all on your part. It’s also surprisingly affordable.
Taking inventory is no one’s favorite task, but it must be done to satisfy the IRS and to ensure that your projections are accurate. There are many ways to do it, but the seasonal or cycling methods are by far the best. Otherwise, consider outsourcing your warehousing and inventory management. By leaving it to the pros, you can feel confident about the accuracy of your reports and focus your time on other, more important aspects of your business.