Everyone makes mistakes, but when you make them over and over again, it can start doing real damage to your business. Here are the five top ones most businesses make and how you can avoid them.
NOT PREPARING YOUR STORE
This is the biggest mistake businesses make. They haven’t properly prepared their store. They haven’t done a physical count of all inventory, and they haven’t entered it into a good inventory management software program – one that’s capable of tracking all goods in the warehouse or storage room.
Prep your store by taking the time to lay out your inventory on a spreadsheet first and then transfer that information to your software program.
Once your inventory is in the system, it’s time to check your stock and make sure that it’s consistent with sales figures. In other words, make sure you have appropriate inventory levels so that you don’t run out of stock before your next scheduled reorder. If you do happen to sell out, and you know it’s not a seasonal rush or an anomaly caused by a special promotion, then change the restocking so that you carry more of that item next month.
NOT PREPARING YOUR COUNTER
You must prepare your counter if you run a retail establishment. If your employees are not properly trained on how to count product that’s set out for sale, then your inventory control goes out the window. It seems like such an insignificant aspect of your business, but it’s very important.
NO AUDIT OR INTERNAL CONTROLS
If you’re not auditing your inventory regularly, you’ll miss mistakes, potential employee fraud, or vender errors. Mistakes happen all the time in shipping. And, while you want to trust your employees, Employee theft is still a major problem in business, with estimates from the U.S. Small Business Association claiming 5 percent of a company’s annual revenue lost to employee fraud and theft.
In hard numbers, this means $50,000 per $1 million in revenue. It might not sound like much, but it’s an employee’s salary, possibly two. That means you could have at least one more employee making your business run more smoothly had you been able to keep that money in-house instead of losing it.
Of course, tight integration with a sales system will tell you about any disparity between the register and inventory, but it’s not always clear that it’s theft that’s taking place.
NO PREP FOR FLASH INVENTORY
If you conduct flash or burst inventories, you must have a clear cutoff date for that inventory. Anything that’s part of the transfer or shipment of that inventory should also be closed and resolved before taking receipt of it, and it should be reconciled afterwards.
NO ERROR RESOLUTION PROCESS
When errors do crop up, what do you do about them? They must be resolved prior to the final submission of inventory. If there’s a discrepancy, it could cost you hundreds of thousands of dollars in overstocked items.