Inventory Management Problems? How Cloud-Based Accounting Can Help
If your business launched with just a handful of products, you might not have found it necessary to track their levels. You could tell by looking at the stack of boxes behind you in your office.
But growth necessitates inventory management. Sooner or later, you’ll have to be able to tell with a couple of mouse clicks whether you can fulfill that big invoice you’re creating. You need to know when it’s time to reorder. What are your best-selling items, and which are the most profitable?
That knowledge requires more than a spreadsheet or some index cards. You need a state-of-the-art cloud-based accounting application. There are very few available for small businesses that can give you this kind of information. Here’s what they can do for you.
Creating Product Records
Inventory-management is an integrated element of accounting software. That is, once you’ve created records for your items, that information will be used in other parts of the website. When you buy or sell items, for example, you’ll be able to select the ones you want from a drop-down list containing all of your individual items.
It may look complicated – and it can be – but once your company’s inventory reaches a certain size, a cloud-based accounting application will solve a lot of problems.
Cloud-based accounting applications contain blank record templates. You simply fill in the blanks where appropriate and select the correct accounts from a drop-down list that displays all of the entries in your Chart of Accounts. In the image above, you can see that the item has been given both an Item Code and an Item Name. These are for internal use only, so you can find them easily.
If you want to turn on inventory management for an item, you click in the box in front of I track this item. If your business buys items for resale, you’d click in front of I purchase this item, enter your cost, and choose the correct Cost of Goods Sold Account and Tax Rate. Then enter the Purchases Description, which will appear on forms sent to your suppliers (like purchase orders).
Finally, you’d click the box in front of I sell this item. Enter the price you charge your customers and select the Sales Account and Tax Rate. Anyone ordering this item will see what you write in the Sales Description box.
If you’re not familiar with the concepts of accounts – and even if you are – it’s a good idea to consult with your financial advisor when you start building item records. It’s critical that you assign the correct accounts. Your accounting professional can also help you set up the appropriate sales tax, so you can just select it from a drop-down list.
Selling Inventory Items
You can create records for items as you enter data on transaction forms, but it’s easier if you complete these before you start recording sales and purchases. Then you can simply select the items from the drop-down list on the sales or purchase form.
State-of-the-art accounting websites let you know when you don’t have enough items in inventory to sell.
You can see how important it is to enter accurate information in item records. Your financial advisor can help you untangle inventory problems, but it’s much easier to learn how to manage your records and accounts from the start.
The Bottom Line
Once you’ve built your database of item records and started entering sales and purchase transactions, you’ll want to know the status of your inventory day-to-day. Cloud-based accounting solutions come with built-in report templates that can give you that information.
This is one of the many benefits of keeping conscientious bookkeeping records on an accounting website that offers inventory-tracking. You always know where you are with your stock. You’ll know what your most popular items are, and also which ones account for the highest profit. That way, you can decide what to order and what to drop, and you’ll know when it’s time to look for a supplier that offers a lower price.
In terms of its difficulty level, inventory management is second only to payroll where your company’s accounting is concerned. You’ll need the help of your financial advisor to get started with it, but once you understand it, you’ll make smarter, more profitable business decisions.