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How Inventory Control Affects Your Financial Performance

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Inventory control refers to the process of maintaining business stock levels to fulfill its customers’ needs. But you may ask: isn’t inventory control the same as inventory management? Although they sound the same, they’re not alike. Yet inventory control is a critical component of inventory management.

What’s Inventory Control

Inventory control is all about inventory, also known as stock. Inventory refers to the tangible and intangible products your business holds to sell and make a profit. These include finished and unfinished goods, raw materials used to manufacture new products, and even service solutions like software programs. Further, inventory control is concerned about your business having the right stock quantities every time and constantly acquiring and holding them at the lowest cost.

On the other hand, inventory management considers all stock processes, including procurement, manufacturing, storing raw materials and goods, sales, and deliveries. Inventory management also includes strategic decisions that enable your business to profit from its stocks.

As advised, consider inventory as one of your critical business assets and inventory management an essential business function.

Why Inventory Control Is Crucial For Businesses

Sound inventory control helps you to secure your stock from physical damage, minimize theft and dead stock, and also enables accurate reporting in financial statements.

Inventory often has many hidden costs that can negatively impact your company’s financial performance—for instance, holding more stocks than is necessary results in high holding costs and increases the probability of future dead stock. Similarly, underestimating your inventory requirements results in stock shortages that directly affect revenue generation when there’s nothing to sell.

Quality inventory control keeps your business running while keeping your costs low, helping it remain profitable. It enables your business to meet its clients’ demands when they arise, enhancing customer satisfaction rates and business loyalty. Good inventory management also ensures a well-planned warehouse that’s easy to manage.

Types Of Inventory Control Systems

Does your business handle any stocks? If it does, you need some form of inventory control. An inventory control system is a critical management tool for:

  • wholesalers
  • distributors
  • retailers
  • manufacturers
  • beauty spas
  • hospitals
  • restaurants
  • banks

Generally, inventory control systems are needed anywhere there are products to monitor and secure. There are two methods of controlling stocks: manual inventory control and automated inventory control.

Most small businesses prefer manual stock control methods, using computer spreadsheets or hardcopy stock books. Nonetheless, it becomes necessary to automate inventory control processes with business growth. Today, various automated inventory control systems have been specifically designed to serve small manufacturing firms with 10-200 employees.

Automated stock control systems allow small businesses to monitor stocks and manage other production processes, including forecasting, reporting, accounting, and other production processes.

Plus, with an inventory control system, you can:

  • Conduct inventory audits
  • Create product bundles
  • Integrate barcode scanners to monitor stock movement, and lead time effectively and optimize warehouse space

In addition to enhancing stock efficiencies, these systems are relatively easy to set up and operate, saving you the time and money spent on physical stock.

Benefits Of Inventory Control


A sound stock control system offers numerous benefits to your business, positively impacting your bottom line.
First, your business is shielded from negative financial consequences by eliminating stock loss through theft, damage, and excessive obsolete stock.

Plus, effective inventory management enables optimal resource utilization, increasing the time and money allocated to other business projects, resulting in business growth and increased profits. Without reasonable inventory control, you can suffer significant business losses.

Below are various ways intelligent inventory control systems contribute to your financials:

1. Improves Your Cashflow

Holding more stock than is necessary can bring your business to its knees. Automated inventory control systems enable you only to maintain and order the correct stock quantity. This frees up financial resources to be utilized in other business activities.
Furthermore, automated inventory control enables accurate financial records and reporting that aids in developing appropriate plans and strategies to alleviate the consequences of any foreseen challenges.

For instance, a sound inventory control system would readily show when you need to make substantial orders of raw materials in short supply in the global market. The lack of a critical raw material may cause your manufacturing unit to remain idle for a long time, resulting in losses as you pay to rent and salaries despite not producing and selling. Reasonable inventory control directly impacts your profitability and cash flow.

2. Enables Real Time Inventory Control And Planning

An automated inventory system provides you with accurate inventory data every time. These systems capture and record all stock transactions in your business. You can get an accurate picture of your company’s inventory anytime, enabling appropriate and timely decisions.

Most businesses struggle with accurate forecasting, which often leads to business storms as goods are ordered late or excessively. By analyzing past data and trends about its stock procurement and sales, intelligent inventory control systems help businesses to forecast with increased accuracy—improved forecasting results in more realistic business plans and better outcomes.

3. Increases Customer Satisfaction Levels

It’s always easier to keep an existing customer than to find one. Nevertheless, to maintain existing customers, your business must be able to meet their needs. Always. This means having the product where the customer wants it and when needed. Sound inventory management systems ensure that stock-outs don’t happen by tracking warehouse stock levels and sales simultaneously.

Reasonable inventory control shows you which products have a high turnover and also points to the laggards. This helps you determine where to allocate more production resources so that fast-moving consumer products are readily available in the right quantities. When your customers are guaranteed to find your product when they need it, their loyalty towards your business grows, resulting in higher sales and profits.

4. Improves Warehouse Planning

Inventory control enables your business to optimize warehouse facilities and processes. Automated inventory systems are especially good with tracking, improving how goods are packed and removed from the warehouse.

Additionally, using barcodes and scanners helps warehouse staff quickly identify a product’s location, keeping the warehouse orderly. This contributes to customer satisfaction as clients aren’t kept waiting as staff members look all over the warehouse for ordered items too.

Summing It Up

Your inventory is a crucial business asset that should constantly be monitored and secured. While it’s possible to carry out inventory control using manual processes, there are more benefits to using inventory management software. Automated inventory management systems easily integrate with most of your business platforms, and a glance can provide a larger picture of where the business is.

Inventory control improves your company’s financial performance by improving customer satisfaction, increasing sales, and better cash flows.

An efficient inventory control system benefits your business, and you should consider it today. There are reliable suppliers you can partner with as you automate your stock management function.