Inventory has a different role and means different things to different parts of your company.
For your sales team, stock is something to sell. For your financial team – stock is an asset to monitor and track at all levels.
An asset that fluctuates in value as the business operates. An asset that has an inverse relationship with revenue.
As the stock value goes down on your balance sheet, it’s usually because sales have been made increasing revenue.
Of course, there’s more to be concerned with from a financial perspective.
If suppliers increase their prices, the cost of goods increases and it affects margins.
If you are doing business internationally, you probably deal in multiple currencies.
And when currencies fluctuate in value – you may not be able to buy as many materials/inventory as you did previously.
There are many other applications of monitoring stock levels in accounting reports for team members concerned with the business’ finances
How inventory and accounting are connected in Enterpryze
The beauty of managing your business in one system is each module is connected and they automatically update each other – so that each team has access to relevant and accurate information in real-time.
Let’s take Enterpryze for example.
When sales are logged in the Sales module, it automatically updates your stock count, stock valuation report and makes the appropriate postings in your general ledger.
This means your finance team can pull real-time reports to see exactly how the business is doing as of this second allowing managers to make decisions faster steering the business towards success.
Time to manage stock in a financial perspective
What do you actually get if you have accurate stock information in your financial reports?
The benefits are multifold. It helps you figure out the value and costs of your inventory which is important for setting prices, getting insured, budgeting and forecasting and more.
Let’s illustrate several ways companies benefit from tracking their inventory closely on the balance sheet and in other financial reports.
1. Increasing Profits from Tracking Inventory Costs
Tracking all of your inventory costs will tell you the true margin on each product you sell.
Identifying these costs such as spoilage from overstocking gives your team the opportunity to work on reducing those costs and ultimately increasing profits.
2. Reduce Costs from more effective Budgeting & Planning
Budgets help your business stay on track from an expenditure point of view.
You need money to operate so it’s imperative that most spending is planned and prepared for.
The budget is a financial roadmap but how close can you stick to the trail if your budget process only gathers up financial information every month or every quarter.
With Enterpryze – you can set budgets and targets and access up-to-date financial information at all times to ensure you never veer off course.
3. Better Manage Cashflow and Customer Demands
Inventory can be a large part of your balance sheet and can have a big influence on your working capital.
It can be a balancing act to manage inventory optimally to meet sales opportunities without crippling cashflow and harming the business in its ability to pay debts, wages and other expenses.
This balancing act can best be performed with a system that connects inventory, procurement, sales employee expenses and accounting processes together.