If you are a retail business or an enterprise that is involved in providing goods to either consumers or other businesses—or both—then you have inventory. Inventory is defined as any good that is within a physical space and that belongs to a business. Thus, it includes raw materials, items that are already work in progress, and those that are finished and/or ready for delivery.
All goods in inventory carry a cost. After all, you need to pay for their maintenance and storage, even if you own the space and doing the upkeep yourself. It is because of the associated costs that you have to manage them very well. You may need purchasing management software.
But what Is the Big Deal with Inventory?
Better yet, why is its management so important that you would require investing on purchasing inventory software? Here is an illustration.
Let us assume that you are selling cheap phones, and you have converted your garage into a mini-warehouse and office to save on rent, so you do not need to charge it to your inventory. However, since you have to ensure that all the goods continue to be in perfect condition once they are sold and that they are safe from theft, you tap on your local surveillance company that charges you around $200 a month.
Phones are sensitive so you also have to install an air-conditioning unit, which increases your utility bill by 5%. On the average, a phone stays as an inventory for about a month before it gets sold.
If you do not use purchasing management software, any of the following may happen to you:
• You will not know how to charge those business costs so you just decide to absorb them. That would have been wise thinking if it is not for the fact that business spending should always be separate with personal ones for better accounting.
• Because you have very little idea of your inventory costs, your products turn out to be underpriced. In the end, you are not gaining any profit even if you can physically receive revenues.
• You commit some of the most common but crucial inventory management mistakes including charging a product twice for the inventory costs.
What the Purchasing Inventory Software Can Do for You
One of the biggest reasons to use purchasing inventory software is to let you manage this very important aspect of business more efficiently.
You now get to charge the right costs for inventory, but you can also keep track of its flow. The software can work alongside other accounting applications for a more cohesive and accurate reporting and picture of the health of your business. Moreover, the software supports your business goals by ensuring you have the right ROI figures.
Using the purchasing management software also automates the process, decreasing time spent on routine tasks. Less time means less use of resources, and that translates to significant savings for the business. Hence, investing on this type of program is a truly win-win decision.
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