For retailers, inventory management and sound accounting go hand in hand so it stands to reason that a savvy accounting professional will provide their retail clients with exceptional services in both fields.
Because the link between these two fields is inextricable, it’s impossible to do one without the other. So why are so many retailers stuck with outdated inventory solutions?
Correctly managing inventory is a make-or-break issue for most retail clients. Too much inventory ties up all sorts of capital that could be better used elsewhere. Too little, on the other hand, leaves businesses unable to meet demand and provide a worthwhile customer experience. Either way, the result is inefficient processes and a dent in the bottom line.
A Modern Answer to an Age-Old Problem
In the 2018 State of Small Business Report, Wasp Barcode Technologies found that over 40 percent of small-to-medium-sized businesses (SMBs) still rely on manual entry accounting or don’t track inventory at all. The downside of these antiquated methods are obvious. You need to spend time and money to manually enter inventory, you don’t have real-time data on stock levels, and you greatly increase the likelihood for human error and lost sales.
The prevalence of stone-age inventory practices is harder to comprehend in a technology age that offers so many solutions. Automated inventory services allow retailers to know exactly how many products they have on hand and where they are.
Workflows can be created to automatically order products when inventory reaches certain levels. Inventory information can talk to other parts of the accounting software to provide precise updates on where and when money is being spent.
Another important facet of modern inventory management is offering cloud-based backups of inventory data. If a business loses their inventory information, they have no recourse but to reboot from scratch. That could require dozens of man hours spent scanning thousands of items. A cloud-based backup ensures that you won’t have to scramble to recover your inventory by any means necessary. Forward-thinking practices can also help reduce shrinkage, a huge cost for most retailers.
When data entry is unclear and difficult to search, it becomes much harder to know when something is missing. Tracking inventory quickly and accurately allows the red flag to be raised much quicker.
A Hypothetical Case Study
A large wine retailer with two locations stocks 20,000 bottles, with roughly 1,000 different products. They order from a handful of distributors and track sales using a modern POS system.
Every week, they go through their sales data to determine how many bottles need to be replenished. But all their inventory entry is done manually, with full inventories done once per quarter.
As invoices come in, they need to be manually added to both in-store inventory counts and financial software. Furthermore, each store’s inventory is discrete from the other. It’s not hard to see all the problems this system presents.
Sure, the retailer knows which bottles are selling, but how can they tell which aren’t? Is one store very low in a certain stock unit while the other has more than enough?
How many days between invoices are the most popular items sold out? And what happens if all that manual inventory data gets lost? Now imagine this much rosier scenario:
That same retailer works with an accounting professional providing integrated inventory and accounting solutions. They scan invoices as they arrive, immediately updating them to a real-time, automated inventory management platform.
Reports can be generated that show inventory data filtered by brand, product time, and retail location. When stock gets low, it can be reordered automatically. All of this information is linked to other aspects of the company’s financial data, pinpointing areas for inventory optimization. And it’s all backed up in the cloud and accessible from any device.
The bottom line is that an accurate and responsive inventory management solution is essential to the health of your retail clients. As an accounting professional, you can use this technology to better serve those clients, adding value and providing them with the tools to run their business more efficiently.
To compete in today’s marketplace, retailers need to make smart use of their capital, not tie it up in useless and unused inventory. By providing them with inventory and accounting data that speak to one another, you give them a leg up on their competition.
You don’t rely on a pen and paper to do accounting work. Retailers shouldn’t rely on it for their inventory, either.
Want to learn more about growing your firm with inventory based clients? Download the guide and get the CPA’s ultimate checklist to managing inventory clients.