Inventory is one of the most critical assets in your retail store. Your profit margin can be significantly affected by stocking the correct products in the appropriate quantities and at the proper time.
How can you tell if your inventory is optimized? Some retailers wait until a spot on the shelf is empty. Others make notes during quarterly stock counts. There’s another way, and that’s through inventory reporting.
What are inventory reports (inventory records)?
Retail inventory reports give you detailed information on the products in stock. These reports, linked to the products you sell and receive, give you a better idea of how much profit your store could make. This data can be used to track your store’s performance and identify areas where you could improve your inventory strategy.
Benefits of Inventory Reporting
Inventory reporting is designed to provide information to help you manage your inventory better. You will be able to unlock new growth opportunities for your business. You will be able:
- Stockouts and surplus inventory can cost you money.
- Make better decisions about your product selection by identifying movement trends.
- Get valuable insights about customer preferences to improve your overall customer experience.
- Spend money on the products that your customers want and budget your purchases accordingly.
- Compare the performance of products and storefronts across channels and locations.
Businesses that are required to report their inventory
You must track your inventory if you sell products to customers, whether a pair of shoes, a latté, or hand-made bracelets. The way you go about it depends on the type of business. A shoe store will track the finished product, whereas a coffee shop will track the components of the latte. And a local artist may want to follow the materials and the finished bracelets.
The top inventory reports that you should be using (and what you can learn from them)
You can generate dozens of reports on your inventory, from tracking changes in the list to checking which products will expire and when. A few reports are most relevant to your business. These three reports on inventory are an excellent place to start.
Inventory valuation report
The inventory valuation report for your business calculates the value of the goods you hold in the form of physical products. It calculates both the cost of your products and the profit you could make from selling them. This report determines your annual ending inventory and maximizes your tax return. This report will give you a clear picture of the financial health of your business.
High inventory value means
A high inventory value indicates that you have a lot of products available to purchase. This can mean that you have enough products to meet the demand of your customers, but it could also be a sign that you need better cash flow. This stock is a source of profit that can’t be used to invest in other areas like marketing materials. You may have to increase your credit line or take out a loan to cover the costs of other expenses until you sell the inventory.
Low inventory value means
A low inventory value means that you have few products. Your order strategy is perfected so you can always have the exact effect needed to meet demand. Stockouts can drive customers to your competitors. This means you’ll lose out on sales and hurt customer satisfaction. You are likely only maximizing profits if you invest enough stock to stay current with the market trends.
Stock forecast report
Stock forecast reports simplify reordering because they tell you exactly what and when to order. This report considers your stock levels, costs, and trends in customer demand when calculating the estimated turnover of a product. A stock forecast report will help you determine when to order additional products to stay on top of the market.
What does a short sales period mean?
Stockouts are possible with a short-term selling period or a high turnover rate. You may need to place more orders in smaller quantities to keep up. This can lead to higher shipping and handling costs. Adjust your reorder level for these products that are in high demand.
What does an extended sales period mean?
A product with an extended selling period has a low turnover rate. This is not a problem for expensive products, but it can be an issue if they do not fit the market. Ask your customers if they think your products meet their expectations. If you don’t, it may be time to reconsider your product range or consider whether your current marketing strategy is reaching your target audience.
Dead Inventory Report
These products should be generating more profit. Dead inventory reports bring these products to the surface. You can make informed decisions about slow-moving items by staying on top.
What does a low number of days since the last sale mean?
You may have discovered that metallic scarves have lasted only a few months, or a product you thought would be popular isn’t. Take action if you’ve recently added a product to your inventory list. It may have needed to be better marketed and would benefit from a new display or listing. Sales or promotions are another way to increase awareness, sell products, and encourage adoption.
What does a large number of days after the last sale mean?
If you have tried several marketing and pricing techniques and the product still sits on your report, then it is time to try more drastic measures. Contact your vendor to ask for a credit or refund. If this is impossible, search for liquidators or marketplaces to sell your product online. Recycling or donating dead inventory will help you get rid of it quickly. While you won’t be making a profit from this, it will allow you to invest more in successful products.
