Inventory management: The importance of accounting software in the present scenario
In current times, businesses are becoming increasingly complex as there is so much of crucial data that needs to be handled efficiently. As a result, accounting software has become vital for any business and so has inventory management. Business owners have realised that managing finances manually will no longer help them achieve their financial goals. For many, poor financial management has become one of the primary reasons for financial loss.
While accounting software lays down the current financial standing of the company, inventory management software helps maintain the inventory health and track all shipments and orders accurately.
These two separate components of a business can be incorporated and integrated for a better overall management.
In the prevailing financial climate, inventory management setup with accounting software lends a competitive edge to businesses by minimizing risks, automating mundane processes, and reducing costs.
Benefits of integrating accounting software
In today’s time, small businesses can get the most out of integrating accounting software and inventory management. Here are the major advantages that it offers:
1. Prevents stock-outs and wastage with inventory optimisation
It’s essential to know the adequate amount of inventory to stock so as to keep investors and customers both happy. On one side, customers want their products delivered on time.
So, it’s important to ensure that the warehouse has enough product storage and doesn’t fall short of demand as that could result in missed opportunities for sales and dissatisfied customers. While on the other side, excess stock requires extra storage and handling charges.
At the same time, investors would want the business to use cash for growth and not have it tied up to the inventory, which can add financial risks to the business operations. Hence, balancing such conflicting objectives isn’t an easy task.
Integrating accounting software and inventory management software can help businesses streamline and organise the data collection process to optimise their inventory. This will help enterprises acquire enhanced visibility and accurate data about their operations in real-time.
This information further can help gather insights related to cash flow reports and sales forecast. With these valuable insights, businesses can avoid stock-outs and wastage of inventory.
2. Reduced labour costs
Labour costs form the most significant expense for many business owners. These constitute almost 70 percent of total costs endured by enterprises. Connecting inventory and accounting software saves time and energy by eliminating the need to manually enter data and transfer data from one software to another.
It helps reduce labour-intensive touchpoints wherever possible and save money by cutting down on unnecessary expenses as all the systems work together, thus reducing the chances of rework.
3. Inventory transparency for supply-chain partners
An emerging trend is to maintain inventory-level visibility in the supply chain so as to better manage customer shipments. For doing this, inventory management software needs to be integrated not only with the accounting software but even the supplier systems. Doing this, businesses can showcase their trust to their supply chain partners.
With the integrated systems in place, there is no need to put in extra efforts to optimise the respective supplier’s product level in the stock. Also, they can now see the level of inventory in the company’s warehouse and gauge if there is enough to fulfil the customer demands. This removes the extra burden, divides the work efficiently and diminishes the possibilities of mistakes.
4. Maintaining accurate financial reports
Every business must match their inventory data with their accounting data so as to find and resolve any probable discrepancies. The asset value in the balance sheet must sit right against the value of the physical inventory in the warehouse.
An error-free financial statement is important for tax purposes as well as to project an accurate view of the company’s financial state to the investors and other key stakeholders. It’s the accountants and bookkeepers who compile these financial statements, and hence inherently, there is a higher risk of errors when the data is handled manually.
Accounting software combined with inventory management ensures that every business activity, such as sales order or purchase order, is accurately captured in the accounting system. This helps avoid mistakes and complications.
5. Helps automate repetitive tasks
The integration of accounting with inventory helps businesses function better. Process automation helps save time, efforts and money as manual work is eliminated. Both the accounting and inventory teams can work with real-time data simultaneously, minimising human errors and confusion.
With this data, important decisions can be taken quickly and valuable insights gained through the software help create effective inventory management strategies. Even the financial reports obtained are precise and well in order.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)