Budget management is critical for business success in the long run, especially for startups, where there is limited capital and resources. With 61% of small businesses not having a budget plan, startup survival is at risk.
One of the main challenges for startup budgeting is inventory management. Mainly because inventory costs constitute around 17%-25% of the whole budget. This is why a successful budget management technique for startups should ideally focus on inventory control. That entails regulating the flow of stock, aiming for maximum utilization, and optimizing costs.
Guide to get started with inventory budget management
As an inventory centric startup, it becomes even more crucial to track stock efficiently. Here is how to get started right:
Invest in the right software: A solid, long lasting investment for any startup is a robust inventory tracking software. Even if you are on a restricted budget, there are some good cloud-based software programs available which can add great value to your business. Secure your information and get regular upgrades for streamlined inventory budget management.
Opt for standardization: As a startup, many companies focus on expanding their revenue streams and lean back on standardizing operations. If implemented from the start, inventory standardization can help streamline stock management. For example, make it a practice to label and count stock items as soon as they are received so you can track every item.
Organize the warehouse: If you don’t know how many items you have there is no way to optimize them. A well managed warehouse enables you to cut down on wastage and utilize budgets efficiently.
How to use a tracking software for inventory budget management?
A tracking solution enables startups to record inventory data in real time and store important information on the cloud. Online data can be accessed easily by everyone, anytime from anywhere. Moreover, by using a tracking software startups can generate unique barcode labels for all inventory items. Such practices ensure standardization so that all items can be entered into the database for quick retrieval.
Cloud-based tracking software offers multiple features to keep your inventory budgets in line. Here are some ways you can take control of inventory costs to optimize resources:
1. Automated inventory procurement for accurate bookkeeping
As a growing startup, you probably have your hands full with working on expanding e sales revenue. There is a high chance that you miss out on noting down inventory expenditures every month. While missing inventory receipts may not seem like an issue in the beginning, it will definitely lead to miscalculated budgets at the end of the year.
With an automated system, you can record every purchase order online. This way, every time a new inventory item is requested by a staff member, a purchase receipt is generated in the software. This receipt is approved by the admin manager and added to the final procurement list. With every procurement record stored online, startups don’t need to worry about tracking inventory costs manually.
When you automate procurement, budget management becomes much more accurate. You can filter through items you don’t need or design proposals for external investments in a timely manner.
2. Actionable inventory consumption reports to forecast trends
Forecasting is key to effective inventory budget management. For this purpose, startups should use data driven analytics to predict consumption trends. A tracking software records all procurement and consumption data through barcode labels. Moreover, if you have low stock alerts enabled you can also track instances of shortage over a period of time.
With all comprehensive inventory data in one place, you can turn customized reports. These reports contain valuable information which can be analyzed by department heads to forecast future demand. Such proactive practices are highly efficient as they eliminate last minute planning. When you have an estimate of the quarterly inventory budget, you can plan other expenses accordingly.
Another advantage of having real time inventory reports is that you can compare the costs and benefits involved. Doing so will help you optimize resources by maximizing the rate of returns. For instance, as a retailer you can increase the hot drinks stock as you know the demand is going to rise in winter; based on previous trends.
3. Seamless warehouse management for balanced stock
Efficient warehouse management helps to control labor costs and eventually keep your inventory budgets in order. As a startup, you might find it challenging to keep track of different shipments . However, warehouse inventory can be managed easily if you have the right tracking software.
With all inventory items labelled with a barcode you can record stock as soon as you receive it. Such practices ensure that you order inventory according to the capacity of your warehouse. Doing so is important as it helps you prevent over stocking and unnecessarily tying up resources. Extra inventory items are likely to get damaged if they are not stored in a proper manner. A balanced stock portfolio helps forecast accurate inventory budgets.
4. Traceable inventory checkouts to minimize theft/loss
When it comes to inventory management, low traceability and connectivity is one of the biggest challenges startups face. Such hurdles cause delays in the procurement cycles and lead to miscalculation of expenses. To avoid such problems, it is important to implement a robust checkout system which allows you to verify possession.
A tracking system offers traceable checkouts with the ability to record ownership. By using this feature, admin managers can investigate any instances of theft or misplaced inventory. Getting in control of inventory movement enables you to eliminate fraud risks and save up on time and money.
Moreover, the ability to monitor inventory possession makes accountability easier. For instance, a bookshop requires 50 packs of printing paper in a month. With traceable inventory checkouts, you can double check the quantity that was actually consumed. And also decide what to do with the leftover bundles. In such situations, staff accountability means that you can directly cut down costs and increase the rate of returns.
The value addition of forecasting for inventory budget management
Inventory expenditure forms one the largest costs of a company’s total budget. In order to efficiently manage inventory budgets, it is important to invest in the right tracking software. A cloud-based system stores real time data and generates actionable reports that are useful for taking business decisions.
Having a robust software system enables you to forecast demand beforehand. The first step is to determine the forecast period. While deciding this time, keep in mind other expenses so you can state exactly how much quantity you have to order. Secondly, you should note down the maximum stock level you can purchase. Having a limit in mind makes it easier to prevent overstocking in high demand season. Lastly the key to forecasting is to decide a reorder point to avoid shortages.
Once you have laid down the rules of inventory forecasting, you need to train your team to practice them. With the right software and forecasting techniques you can implement streamlined inventory budget management and improve productivity for your startup.