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Inventory Control System

Inventory Control System

Inventory Control System - Automated Inventory Control Systems: The Entrepreneur’s Reliable Partner in Inventory Control and Management entering of available and sold items. 

These inventory technologies make use of wireless technology to send information to the main computer for all the business transactions made and real-time updates are entered to the inventory system.

The fully automated inventory control system allows businesses and enterprises to ensure that they have enough supplies of the in demand items. For manufacturing companies, these systems allow them to check if the raw materials are adequate for the projected production and to keep track of the timeframe of the shipment and delivery of products to clients while minimizing the cost of carrying. 

With this state-of-the-art business tool, entrepreneurs can reduce or eliminate financial losses coming from different aspects of the business. Storing excess stocks can lead to a rise in the storage fees and loss of product quality. 

Shortage can lead to profit loss and diminished customer loyalty. It is very important to keep everything balanced in the business to make sure that losses are reduced and the levels of investments are fully optimized.

The selection of the best system for inventory control and management is a crucial task for every entrepreneur. There are different types of businesses, therefore, the inventory management and control needed by every type of business may vary. 

Entrepreneurs must conduct a careful evaluation of the inventory control needs and requirements of the business they are running to ensure that the system they have selected can efficiently carry out all the inventory-related tasks. 

The system must also feature a sophisticated and reliable database to ensure the safety and security of all the encoded inventory information.

An effective inventory control system suggests a good quality control system for the business. It also characterizes the capability of the business to handle and systematically organize all the transactions revolving around consumer goods. 

A reliable system for inventory control and management alerts the business when the inventory runs low, when re-ordering is needed, when deliveries are late, when goods delivered are lacking and other important dates to remember to ensure that the business will never run out of stock or pay for additional storage for excess items.

Perpetual Inventory System

Following are some of the distinct advantages of using the perpetual inventory method of recording over the periodic inventory system:

1. Under the system of perpetual inventory, the amount of inventory on hand at any point in time during the accounting period is readily available. This gives added flexibility in providing for customer needs, as opposed to conducting a physical count only once a year.

2. The perpetual inventory system does not need a yearend inventory count to determine the cost of goods sold. This is because the cost of goods sold account is updated every time sales are recorded. Likewise, regular physical inventory counts are conducted to make sure that the actual on hand inventory always matches the records. 

Under the periodic system of inventory, adjustments are made only once a year or every time a physical count is conducted. In some cases, when the discrepancy cannot be accounted for, the inventory losses are charged to cost of sales.

3. In a perpetual inventory system, only the actual amount of the stocks sold is included in the cost of sales. Whatever is outside the balance of the ending inventory is not assumed as cost of goods sold. By comparing the physical inventory with the items sold, inventory shortages from pilferage, damage and others, are properly accounted for.

This cannot be easily done under a periodic inventory system. The "should be" inventory balance will have to be computed by adding the net purchases to, and deducting the cost of inventory sold from, the inventory balance per books. 

The cost of sales, however, must first be computed based on the actual sales made from the start of the current accounting period. This alone may take time.

Perpetual Inventory and Physical Inventory Count

Although an annual physical inventory count is normally done to account for, and match the inventory on hand against what is recorded on the books, a perpetual system of inventory does not rely on this activity to determine the actual cost of goods sold for the year. 

Rather, it is merely done to verify the accuracy of the inventory records. Therefore, a yearend physical inventory count may not really be necessary in a perpetual inventory system especially if the activity will get in the way of performing normal business functions. After all, it is continuously done at regular intervals within the year.

Another important concept in controlling inventory is the re-order point, which refers to the time when new stocks are purchased and stored. Based on the business needs and demands of the clients, entrepreneurs can make a prediction of the best time when to do the re-ordering of goods. 

The time between two orders must not be very short to ensure that the storage room will not run out of space, keep goods in their best conditions and avoid possible financial losses due to either shortage or surplus of goods. 

Determining the perfect time to do the re-ordering will require a businessman to know the timeframe of delivery and the right amount of quantities needed by the business by the time it arrives. 

In addition, the overhead costs, miscellaneous fees and shipping expenses of ordering small quantities versus ordering large quantities must carefully evaluated to ensure that the re-ordering point will be highly beneficial to the business.

Businessmen and entrepreneurs must keep in mind that inventory control plays a vital role in managing a business. An efficient scheme for controlling goods can save a businessman from unnecessary trouble and can help him save and earn a lot of money. 

Moreover, the pleasant feeling of satisfying the needs of customers and earning their loyalty is the best part of running the business through effective control of inventory.

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