The Effect of Inventory Control on Profit Making

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Inventory control is essential to any business’s profit. Effectively regulating inventory includes managing the cost of inventory as well as managing inventory purchases. Placing a few controls and system checks in place will allow you to increase profit margins.

Cost

The cost per inventory item is crucial to the successful implementation of inventory control. Without realizing it, inventory costs can increase slowly over time. Review your current inventory costs per item and compare them to six months ago, one year ago and two years ago. Make sure there is a plausible explanation for any increases.

Stock

Removing inventory that is not selling well from your shelves allows the business to stock more profitable items. If a customer requests a specific item that you no longer carry, you can offer to special order the item. Stocking inventory that sells quickly yields high turnover and therefore high profits.

Monitor

Businesses that monitor inventory turnover realize larger profits. When employees know that inventory is monitored on a regular basis, they are more likely to accurately report sales.

POS Systems

Point-of-Sale, or POS, systems take the guess work out of managing inventory. Computerized records allow the business owner to analyze inventory trends as well as supervise inventory on hand. POS systems increase profitability because each item is electronically tracked.

Manual Inventory Count

Knowing how much inventory you have on hand at any particular time benefits your bottom line. Taking a manual count of your inventory annually, even if you are using a POS system, will point out discrepancies in inventory levels as well as let you get reacquainted with your current inventory.

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