How does Inventory Management Work?

By managing inventory, companies identify when and what stock to order. As well as keeping track of inventory from purchase to sale, the practice identifies and responds to trends, ensuring there is always a sufficient Inventory management system in Malaysia to fulfill customer orders and providing warnings when a shortage occurs. Having too much inventory (even though it is shown as an asset on the balance sheet) reduces cash flow and makes the company lose money when the inventory is sold. Good inventory control requires a high inventory turnover rate. Inventory turnover reports how many times the stock is sold during a given period. Businesses shouldn’t keep more stock than they can sell. Poor turnover can lead to deadstock. Accounting identifies inventory as an asset, which is used as a basis for recording the correct balance sheet values. Inventory is a mix of raw materials, components, and finished goods.

What is the importance of inventory management?

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In order to keep a company healthy, an Inventory management system in Malaysia is vital, since it ensures that there is rarely too much or too little stock on hand and limits the risk of stockouts. Taking inventory is a requirement for public companies to comply with SEC rules and the Sarbanes-Oxley Act. Companies need to prove their compliance by documenting their management processes.

The benefits of inventory management

Managing your inventory will ensure you can fulfill incoming or open orders and boost profits. Another benefit is that it will ensure you can fulfill incoming or open orders.

  • It helps you save money: Knowing what you have in stock and where you have it allows you to make better use of it. By doing so, you can also keep less stock at your locations (stores, warehouses), as you can pull from anywhere and fulfill orders at any time all of this reduces inventory costs and decreases the amount of stock that goes unsold before it becomes obsolete.
  • Improves Cash Flow: When inventory is managed properly, you spend money on stuff that sells, so there is always cash going from one part of the company to the other.
  • Satisfies Customers: Providing customers with what they want on time is one way to build loyal customers.