What is Inventory?
What is inventory? Sometimes the following title can carry different definitions depending on the course of study, however, in general terms; inventory can be described as the total number of goods or materials that would be featured in a particular store. The store in this case can be a retail store or a factory that manufactures the anticipated goods.
The idea behind understanding the value of inventory in any business is that the store owner needs to know what amounts of goods are present in the shelves, what kinds as well as the possible amount of goods that would be missing in the same shelves so that they can be added. The purpose of the inventory is applicable to both small and large business owners, which means that factory owners also have to know what shipments need to go out the amount and the specific time.
Why take an inventory?
It has been accounted that most businesses would have a tendency of taking an inventory, especially on the regular basis so that they do not run out of common items that customers like to purchase. Inventory is therefore, the act of identifying and counting the anticipated goods as a way of ensuring supply doesn’t run out.
Another reason for taking an inventory is that this acts as an insurance towards the total number of goods ordered hence comparing those with the total number of goods delivered to the stores and this is accountable physically as it would in confirming the arrival of any shipment. When the inventory has been counted, and physical identification differs from what the list accounts for, then it means there were cases of theft or even poor accounting practices. The smallest mistake in the inventory can mean the worst in the business forcing closure or leading to unimaginable losses.
Who should consider taking an inventory?
While any business should consider taking an inventory to avoid unforeseen losses, it is crucial that inventory is taken in advance so that any orders can be met and accounted for in time. Restaurants should exercise taking inventory to avoid ordering too much of what the restaurant may not be able to sell as well as ordering minimal leading to some customers lacking food to eat. This is the same case with most retail businesses.
After you already understand what your business brings each day, and what goods sell out first, you will be able to meet the demand of the market in that anticipated area. Note that the better you supply people with all the goods, they need, the easier it would be to run business at that particular place hence the profits you will make and all this is possible by understanding inventory and what it has to offer.
When the inventory number is high, but the sales seem to be low, to avoid some goods going to waste, companies tend to offer significant discounts and hence another benefit of inventory management. With the course of price discounts, the practice is commonly associated with car dealers who want to order new models.
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