Business

Inventory generally accounts for the largest single investment a retailer makes. Many retailers simply don’t have the time and resources it takes to control their inventory adequately. As a result they have too much money tied up in the wrong inventory items. It’s important to track and analyze inventory properly to eliminate avoidable expenses like overstocking, over billing, and shrinkage, not to mention the less tangible cost of stock shortages, frustrated customers, and lost sales.

Every retailer quickly learns that some items sell out faster than you can get them in the store while others sit on the shelf gathering dust until they are steeply discounted. When it comes time to reorder, you need to know how each product performed for you — how well it sold and how much profit it contributed to your business — in order to make an educated purchase decision. It’s impossible to keep track of every product’s performance history in your head, but a good retail POS system can generate performance reports by product and by vendor so that you can stop guessing how profitable each line was over a given period of time.

The easiest way to see how effective inventory management saves you money is in the cost of carrying inventory. Let’s suppose your company maintains a $60,000 inventory level and turns over the entire inventory twice a year. With a vigorous inventory management program and a dependable supply chain, you might cut the inventory in half and turn it over four times a year. But perhaps some of your key inventory items come from suppliers that cannot always make timely deliveries. If so, perhaps you cannot cut your inventory of those key items in half without risking running out of stock should delivery be delayed. That might mean you can only get your inventory investment down to $40,000. Even so, you will reduce you inventory carrying cost by $20,000. Money that was previously earning no return can be put to work buying fast-moving new inventory items, marketing your business, or taking advantage of other investment opportunities.

In short, a retail POS system shows you what your faster selling items are so you can order more of them and what your slower selling items are so you can order fewer of them. In addition to eliminating excess inventory, the retail POS system notifies you when you need to reorder items so you don’t run out of stock. Eliminating excess inventory saves you carrying costs. Preventing shortages of important inventory items boosts sales, improves customer satisfaction, and promotes customer loyalty.

Faster and More Accurate Transactions

User errors are costly. If a sales clerk rings up a $19.95 item as $1.95, the business owner loses $18.00 on the sale. If the receiving clerk checks in the wrong quantity of received items, the costs can include overpayments, under-stocked inventory, and hours of wasted time untangling the discrepancy with the vendor.

All of these errors have a negative impact on short-term profitability and, because they lower the overall level of customer service, they have a negative impact on long-term profitability and growth as well.

Using a barcode scanner that plugs directly into your POS computer greatly improves the speed of checking in received shipments and checking out sold goods, and reduces the chance of human error.