Cost Control Tips for Inventory-Intensive Businesses

If you run a business that depends on inventory, managing your costs is very important. In Florida, businesses like retail stores, manufacturers, and distributors face various challenges. You might have to deal with problems like changing customer demand, supply problems, and high storage costs because of the humid weather. 

You have to keep enough stock for your customers, but not so much that you lose money. Creating a balance between these can be tricky. Moreover, there are hidden costs as well. For instance, you may have to pay for storage, insurance, damage, and spoilage. You may even lose money sometimes because your cash is stuck in extra stock. 

While there are ways to lower inventory costs, applying these strategies is not as straightforward. Therefore, before you start making any changes, it is good to talk to a local CPA in Sarasota, FL, preferably one with experience with inventory-heavy businesses. They can look at your current inventory and find areas where you can save. 

Cost control tips for high inventory businesses

1. Use an inventory tracking system. 

You can use an inventory tracking system to manage your stock levels and save money. This system shows you your inventory in real-time, so you know exactly how much you have. It helps you avoid running out of products or keeping too much in stock. 

An automated system also reduces the mistakes in tracking your inventory that come with manual work. Even though a tracking system costs money to set up, it is worth it for your business in the long run. It improves accuracy and keeps your customers happy. 

1. Know the right amount to order. 

You can save money on your inventory by finding the right amount of products to order. If you order too much, you pay extra to store it. On the other hand, if you order too little, you may run out and lose sales. The Economic Order Quantity (EOQ) model can help you figure out the best order size. It considers various things, such as: 

• how much you sell in a year, 
• how much it costs to place an order, and 
• how much it costs to store your products. 

1. Apply Just-In-Time (JIT) inventory management. 

In Just-In-Time (JIT) inventory management, you only get the materials or products you need right when you need them. This might seem impossible to work, but it can be done right by working closely with your suppliers. 

Talk to your suppliers about the method you have adopted and why it is important for your business that the inventory arrives on time. JIT can save you tons of money and reduce wastage if it is done properly. 

One requirement for JIT to work is that you must have strong partnerships with your suppliers. Also, your suppliers should be highly reliable. 

1. Perform regular inventory audits. 

Regular inventory audits help you determine how much stock you have and catch problems early before they cost you money. While doing physical inventory counts takes time, it is helpful to know if your recorded stock matches what you actually have. 

You can also use cycle counting, which includes checking small parts of your inventory regularly instead of counting everything at once. This method keeps your records accurate without keeping you busy on a single task too much. 

1. Improve demand forecasting. 

By accurately predicting how much inventory you are going to be needing in the future, you can reduce wastage. This can be done by analyzing past sales and market trends. Modern tools that use AI can make your forecasts more accurate by analyzing many factors at once. This way, you can avoid having too much or too little stock. 

Cut hidden costs before they cause losses!

Inventory-intensive businesses in Florida face various challenges. Do not let excess stock, spoilage, or missed sales hurt your bottom line. Speak with a local CPA in Sarasota today to optimize your inventory!