Today, up to 24 percent of small businesses manage their inventory with spreadsheet software, using formulas unique to the departments that produced them. While this approach may suffice initially, the ability to maintain accurate records becomes increasingly difficult for a business as it grows.
When a client upgrades from spreadsheet software to an inventory management platform, the migration process can pose some real challenges for you and your client:
- The data fields used in the spreadsheet software may not match those utilized by the inventory management system.
- Information manually entered by employees into the new platform is likely to contain entry errors.
- Inventory in different stages has different values and changes with the addition of different materials or ingredients as it moves through production. When graduating from a system based on data aggregated by spreadsheets, management may have neither a clear picture of product performance nor know how to plan to meet demand while avoiding over or under-ordering.
Your goal is to make the move as painless as possible for yourself and the client.
In the short term, a physical inventory count will bring the books up to date, but as a long-term solution for a growing business, your client needs software that updates inventory in real-time. Generating an accurate valuation entails incorporating all stages of workflow, waste, byproducts, costs, labor, assets and overhead as they occur. When your client has most cash flow tied up in inventory, planning for any kind of growth relies on minimizing inventory investment while continuing to meet demand without compromising quality.
For many small businesses, a first step in modernizing recordkeeping is moving to QuickBooks Online, which is used by millions worldwide for broad accounting functionalities. But an add-on software application is needed for any type of advanced inventory features. Ideally, the inventory software should sync with and enhance existing QuickBooks capabilities. For software to do a good job of managing inventory, it must account for all the activity that takes place behind the scenes in the warehouse or on the production floor.
Feature Considerations for Add-On Inventory Management Software
Inventory tracking, wherever it exists. Inventory can exist at many different locations, from warehouses strategically located to serve geographical regions to third party drop shippers. The tricky part is integrating inventory from multiple locations into a single resource.
The only feasible solution is a central database that can maintain inventory counts and costs separately for each location yet integrate them for the entire business. Moving inventory from one location to the other then becomes simple to track because a transaction will transfer the product within the system, subtracting the quantity from one location and adding it to the other.
Human error can be minimized with the use of barcode scanning that sends data directly to the database and shares that information company-wide. Upon arrival from the supplier, a product or raw material can have its entire journey logged to include the product name, description, and all characteristics, as well as every change made and cost incurred until the finished product is delivered to the customer.
The key to streamlining workflows is automating as many tasks as possible. The whole premise behind abandoning spreadsheets is to have the ability to react quickly to avoid running short on inventory or ordering more than is needed to meet demand. If purchase orders can be placed as soon as products reach reorder points, one big problem is alleviated. By setting a minimum quantity for each item, the reorder point can be calculated to consider lead time from the supplier, keeping a steady flow of incoming materials to prevent production slowdowns or stoppages.
Advanced tracking functionalities. Different industries face different challenges. Some involve hazardous materials that require specific environments and handling. Others deal with perishable goods that cannot accumulate on shelves. Each industry must set up an inventory method to match the challenges it faces, workflows involved, and regulations imposed by outside organizations.
Local and national laws impose more stringent rules on some industries, such as food and pharmaceuticals. It’s in the client’s best interest to keep accurate records of their products at different stages, logging expiration dates and utilizing forward and backward traceability capabilities. Tracking expiration dates also facilities the application of a First In First Out accounting method to ensure product is sold in the order it is created, preventing spoilage and maintaining high quality. To prevent product expiration while still in stock, the client needs to be able to dial back production to match current demand. Awareness that a item is expiring soon enables the client to offer the product at a discounted rate to move it faster. Lot tracking functionality is key to accurate expiration date tracking.
High-end items such as computers, vehicles and appliances are often tied to warranties after the sale. Serial number tracking links the product to the customer and warranty. When the customer needs a repair performed, the manufacturer can look up the serial number and view the customer information and services promised in the warranty.
Both lot and serial number tracking give businesses greater insights into the location of a product to provide a higher level of quality and service to customers.
Kitting capability. Some finished products are assembled into kits following a bill of materials and process templates, i.e., a 24-pack of soda cans. Items placed in kits also can be sold separately. As each item is removed from inventory to create the kit, the inventory count needs to be updated. Once the kit is complete, it becomes a new product added to inventory. Keeping inventory counts updated as these processes occur, while adding on the costs involved with creating a kit, such as packaging and labor, will give you the most accurate cost per product. If a kit is returned, it can also be disassembled and its individual items can be logged back into inventory, if they are still suitable for sale.
Assemblies and process manufacturing. Creating a finished product via discrete manufacturing can involve many steps and components that utilize a Bill of Materials. One workflow may create a part that goes into the product at a later workflow stage; a finished product can be built with multiple assemblies.
When manufacturing food, skin care, pharmaceuticals or other products created by process manufacturing methods, a recipe or formula indicates ratios of raw materials to use in the assembly. The software must support fractional quantities and yields.
Backorder processing. When a sales order is generated, any items not in stock are placed on backorder, and the customer is usually notified.
Backorders occur when demand increases but invoicing need not come to a standstill. By generating partial invoices for orders partially shipped, the business can keep cash coming in and maintain customer satisfaction by shipping items that are in stock. Items in stock can be shipped and invoiced while the business awaits delivery of the backordered item by the supplier. Your software should be able to create partial pick tickets to send to fulfillment and generate a partial invoice for items shipped. Upon receipt of the backordered item, the balance of the original sales order can be invoiced and shipped.
Advanced reporting. Working with a tool that provides greater insights into product performance equips businesses to make more informed decisions. Detailed reports—ones that allow the user to perform deep analysis into product performance, costs, waste, etc.—provide insight you cannot find in a departmental spreadsheet. When determining how much to order or where to invest capital, the more information your system can provide, the more confidence you can have in its analysis.
Managing inventory is often like facing down an ogre. But working with a system that can be customized to your client’s needs can make the setup process easier. If it’s too difficult to explain, the client probably won’t use it to its full potential. Today’s workforce demands mobile-friendly, cloud-based solutions to accommodate remote workers and staff at any location. Software designed to streamline processes in times of greater demand is needed to navigate the unexpected times ahead.
Author Bio: Theresa Happe is a digital marketing expert at SOS Inventory, the inventory, order management and manufacturing software designed for QuickBooks Online.