Types of Inventory Management Systems

Businesses need a system to keep track of their inventory. A pad of paper, a pencil, and a spreadsheet may work for a while, but you will soon discover that you need something a little more sophisticated. Most entrepreneurs will start searching for an inventory management system when their needs outgrow a simple spreadsheet. An excellent first step is to understand what’s available in the market and the advantage of each.

  1. Manual system

This is where most business owners start, especially when their companies are young. In most cases, people who use manual methods have few products to keep track of, and can easily keep changing everything on a spreadsheet. You simply create a spreadsheet to track purchases, sales, and stock. If you are very conversant with excel, you can set your manual system to calculate when products are almost out of stock.

Advantage:

  • low to no cost involved

Disadvantage:

  • time-consuming
  • prone to human error
  • not suitable for growth
  • can’t track inventory increases, theft, and loss
  1. QuickBooks

QuickBooks is a de facto standard and a favorite for many accountants. The software has managed to garner 80% market share in the business world with accountants recommending its use the minute a business starts to grow. The software is great for bills, payroll, and payment management, but it’s also useful for inventory management.

However, it does not have many of the capabilities needed to manage inventory properly. It’s the best alternative to manual spreadsheets. As your business grows, you need an inventory system that will specifically meet your needs and track your stock to your specifications. It’s common for companies to add functionality to QuickBooks to bridge the gap, but most prefer to get a tailor-made system.

Advantages:

  • Way better than a spreadsheet
  • Provides basic inventory management functionality

Disadvantages:

  • Can’t track serial numbers
  • Can’t use barcodes
  • Doesn’t have advanced barcoding
  • Might limit you in multiple product IDs and alternative product descriptions
  1. Perpetual inventory control systems

A large business prefers to have information about the continuous availability of different products, store purchases, issues, and balance at hand. Planning becomes easy, products are not lost, you know what’s moving and what isn’t, and your customers are happy because you know when to restock.

This system is accompanied by a continuous process of stock-taking and auditing aimed at checking the total and finding out if there are any mishaps. This takes place as often as recommended by your accountant (not your storekeeper) and usually taken on rotation to have a more effective check. Proper implementation of the system ensures full and efficient control of your inventory.

Advantages:

  • Quick valuation of stock
  • Lesser investment in non-moving stock
  • Helps formulate purchase policies
  • Immediate detection of theft and leakages
  • Ensures efficiency of store organization
  • Protects your working capital

Disadvantages:

  • Costs money

While the perpetual inventory control systems might be costly, we always advise business owners to go for this option. The advantages significantly outweigh the cost, saving you money, time, and frankly, headaches. Your business becomes efficient, putting a little more time on your hands to concentrate on expansion. Always let an ICPAC accountant, such as BCML accountants, recommend a system for you. You can book a free consultation to find out the best perpetual inventory systems for your business.

 

 

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