How to Calculate Inventory Accuracy: Its Impact on your Operation and Numbers

Here are some tried-and-tested methods for improving inventory accuracy. If you don’t have a clear understanding of how much inventory you have, you may buy more inventory than you need. When https://kelleysbookkeeping.com/ you have a surplus of inventory that isn’t selling, it is sitting on the warehouse shelf racking up holding costs. Knowing when to move those items helps you drive down operational costs.

However, inventory accuracy is often below 100% for several reasons, including theft, miscalculations, and damages. Many eCommerce retailers desire to be as self-sufficient and cost-effective as possible by taking care of the entire process of inventory management and order fulfillment on their own. When inventory is not professionally stored or handled at a warehouse, it might result in inventory accuracy issues. Transactional problems are a common cause of inaccurate inventory records. When consumers purchase your products — whether physically or online — it can take time for your inventory system to reflect the departed stock accurately.

Minimizes stockouts and overstocking

Periodic counts should be performed every two months or three weeks, depending on the size of the warehouse and the needs of the company. This provides more visibility than yearly or seasonal options, but it requires more time and workforce. Improve your inventory management with Upper’s advanced route planning features and stay on top of your business. Use optimized routes for your multi-stop deliveries and wrap up your delivery schedule early. It offers reports and analytics features that collect and visualize real-time statistics to assess your inventory accuracy. A company may only have one product carton left but cannot locate it due to storage issues.

Another root cause of inaccurate inventory counts is mismanaged returns. Inaccurate inventory counts can lead to problems with your supply chain and order fulfillment process. When you have a large number of items, it’s easier to misplace them without an inventory management system for storage. A disorganized warehouse causes products to be lost or not tracked properly.

It helps you prevent stockouts and overstocking, and reduce operational costs. We hope the 5 best practices for inventory accuracy have given you the right knowledge to https://bookkeeping-reviews.com/ boost your inventory management workflows. A highly accurate inventory will inform you with better demand forecasting and contribute to greater customer satisfaction.

  • Inventory accuracy is the accuracy to which the actual quantities of raw materials and finished goods match what systems like ERP says is there.
  • When your inventory isn’t properly marked, this misinformation gets added to your inventory app and creates greater issues down the line.
  • The worst part about order fulfillment errors is that your inventory counts will be off before you even receive the shipment.
  • Most businesses will encounter an incorrect quantity of one or more products in their warehouse at some point.

Drive ROI back to your business across all customer touchpoints—in-store, online, and on mobile. Book a time with our team to learn how we can help transform your business with our omnichannel solutions. Sort your inventory into categories based on how valuable they are and how quickly they sell. This helps https://quick-bookkeeping.net/ you focus your resources on managing the most important inventory accurately. Make sure your employees are well-trained in how to enter data accurately and handle inventory properly. Employees who know what they're doing are less likely to make mistakes, which means better accuracy in managing inventory.

RFID Technology

As mentioned above, cycle counting is a type of perpetual inventory audit. Inventory audits compare your actual inventory levels to your current financial records to guarantee the accuracy of your accounting. When your inventory isn’t properly marked, this misinformation gets added to your inventory app and creates greater issues down the line. Most notably, it’ll cause your physical counts to differ from your inventory records. For instance, comparing stock records to your physical inventory will reveal whether you have inventory shrinkage (when your actual stock is less than the recorded balance).

The Inventory Accuracy Formula

This information can be used to make smart decisions on where to stock them for faster, cheaper shipping. This data helps shippers to make inventory management decisions based on where and who they ship to. At Finale Inventory, we focus on improving inventory efficiency to help you manage your supply flow better. Our accessible and modernized offerings simplify your inventory process, and our adaptable software easily grows to account for developing businesses. You can trust our detailed reports to present the best depiction of inventory accuracy throughout it all. At Finale Inventory, we understand the importance of inventory accuracy.

The Role of Cycle Counting in Maintaining Inventory Accuracy

If your inventory management system is basic or non-existent, you may be tracking inventory on paper, spreadsheets, or not at all. Having integrated technology helps keep inventory records up-to-date, making things easier for accounting purposes, helping prevent stockouts, and streamlining purchasing from manufacturers. Inventory accuracy can contribute to your customer satisfaction and loyalty. If you can display the correct product availability, customers won’t order out-of-stock items, for example. The order fulfillment process will go smoother as well with faster shipping. This leaves a good impression on customers and increases repeat purchases.

Understanding the Components of the Inventory Accuracy Formula

It involves periodic partial stock counts throughout the year, offering a more accurate and efficient counting method compared to an annual full stock count. By adopting cycle counting, businesses can grasp their inventory reconciliation tasks better and spot discrepancies promptly. Ensuring meticulousness during cycle counting minimizes errors, ensuring up-to-date and accurate records.

Additionally, you should establish a clear and realistic cycle count schedule and procedure that covers all your inventory items and frequency categories. Finally, it is essential to analyze and review your cycle count results and accuracy regularly, taking corrective actions if needed. Calculating cycle count accuracy in warehouse inventory can help you improve your warehouse operations in several ways. First, it can help you identify and correct any sources of errors, such as data entry mistakes, mislabeling, theft, damage, or obsolescence.