As a business owner, it’s important to keep a close eye on your inventory and supply chain. But it’s also understandable that you’re busy and have no time to carefully chase information about how your inventory is doing. So how can you better understand your inventory and get valuable insights without looking through so much data? Inventory reports, of course!
Inventory reports provide critical information about your inventory, key metrics and trends that could change how your business operates and performs. What’s more, inventory management software can help you generate accurate reports, free from human error and discrepancies caused by manual methods. These inventory reports will optimise your inventory management, improve customer satisfaction and increase profitability.
However, there are several types of inventory reports that you can use, depending on your purpose and specific business operations, goals and industry. So let’s dive into 5 essential reports you need to generate, and improve your inventory management strategy.
Essential Inventory Reports You Need
1. Inventory on hand report
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Do you know how much inventory you have right now? Which products are running out and which are overstocked? The inventory on hand report answers these questions with a comprehensive overview of your stock levels at a given point in time.
What does this type of inventory report do for you? With inventory on hand reports, you can accurately monitor stock levels and thus, make informed decisions about purchasing, production and fulfilment. Streamline your supply chain with valuable insights into inventory availability.
Moreover, with real-time visibility, you can strategically avoid stockouts and overstocking by optimising your inventory. While doing that, these reports enable you to Identify and replenish products to meet customer demand without incurring excess inventory holding costs. And of course, with reducing unnecessary slow-moving inventory, taking proactive measures to prevent inventory obsolescence and reduce holding costs can be achieved.
All in all, the inventory on hand report helps businesses to make data-driven decisions, and is a vital tool for effective inventory management.
2. Inventory performance report
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When you’re looking into the performance of your inventory, how do you analyse your key performance indicators (KPIs)? The inventory performance report provides you with the exact data you’re looking for, with critical insights into your inventory health and top performers. Some metrics that the report provides include sell-through rate, turnover ratio, and days of inventory on hand among others.
Not only does the inventory performance report identify top-selling products and slow-moving stock, but it also accurately forecasts demand. By knowing the best and worst performers among your inventory, you can allocate resources more effectively and maximise sales opportunities. To get rid of slow-moving stock, implementing marketing strategies, sales or pricing changes can expedite sales so you don’t incur excess holding costs.
All of this is even more effective with demand forecasting so you can plan for future demand and ensure you have the right availability of products, especially for seasonal or peak periods.
So if you’re effectively managing your inventory, this inventory report empowers you to make informed decisions about pricing, promotions, and stock replenishment.
3. Inventory valuation report
Source: Freepik – Inventory Reports
Essential for financial analyses, budgeting and strategic decision-making, the inventory valuation report compiles a comprehensive analysis of your inventory’s monetary value. It details a complete breakdown of each item’s worth in one place, so you can accurately determine how your inventory holdings affect their bottom line.
How does this inventory report work? The inventory valuation report uses valuation methods like the weighted average cost, first-in, first-out (FIFO), or last-in, first-out (LIFO). This results in insights into not only the overall value of your inventory, but also the cost of goods sold (COGS) and the value of the ending inventory at a given accounting period.
Read more: Here’s a great article by Investopedia about the cost of goods sold and its importance.
As a business owner, it’s crucial to understand the financial health of your inventory – any assets, liabilities and equity, actually. With this inventory report, you can determine this and make informed decisions about pricing, promotions and what items to invest in. High value products get more investment and you can better allocate your resources.
And if you need to analyse inventory performance over time? Comparing value over different periods allows you to identify trends and thus, evaluate your purchasing and sales strategies. Additionally, this inventory report can help your business comply with accounting and taxation regulations. It provides the necessary data and documentation to be transparent in your financial reporting.
By using inventory valuation reports, you better understand the worth of your inventory, and can optimise your strategies for long-term success.
4. Ageing inventory report
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To answer questions like how old is your inventory and how many slow-moving or stagnant items there are, you’ll need an ageing inventory report. This report groups products into age brackets – 30, 60, 90 days and more – to give you insights into inventory turnover and inventory that has been on shelves for extensive periods of time.
The ageing report has many benefits to it, some of which include: preventing inventory obsolescence, reducing holding costs, and optimising working capital and cash flow. To mitigate any inventory problems, you can take active measures to evaluate the effectiveness of your sales and inventory management strategies. With this inventory report, you can evaluate your inventory health, and reallocate resources into marketing, promotional activities or more high value products.
Managing ageing inventory effectively can help you maintain optimal stock levels, reduce carrying costs, improve cash flow, and boost profitability.
5. Stock turnover report
Source: Freepik – Inventory Reports
Stock turnover is important to track in order keep products from becoming obsolete and keep them moving off the shelves. That’s where the stock turnover report comes in.
Like many of the other reports, this one helps you identify slow-moving or stagnant inventory. Using the ratio of cost of goods sold (COGS) to the average inventory value, this report calculates how often inventory is sold and replaced over a specified period, typically an annual period. A high stock turnover ratio is good as it indicates that your inventory is moving effectively.
Tip: Assess the speed of inventory movement and also your inventory control strategies. Are these items moving out of your storage and your shelves? Are your strategies working as they should? Could you improve them to optimise turnover? These are questions that you should consider while looking at your stock turnover reports.
Some things you can optimise by analysing your inventory turnover rate are reorder points and quantities, sales and marketing, and performance indicators compared to industry averages. The stock turnover report can be powerful in evaluating the efficiency of your inventory management. Once you get it optimised, your business has the greatest chance of profitability.
Conclusion
Ready to start implementing these essential inventory reports? They’re a game-changer for your business, giving you the correct information to be more efficient, cost-effective and profitable with your inventory and business operations. With them, you’ll be able to harness data-driven insights and maximise efficiency with better decisions, proactive measures and a deeper understanding of your inventory.
Here’s something to think about: inventory management is not just about stocking products. You need to identify the patterns and nuances of your stock, and actively aim to optimise it at every opportunity.
Your business will achieve long-term success if you leverage these reports to make informed decisions, streamline operations, and improve efficiency.
Ready to get started? Take a look at some of our other articles to learn more about effectively managing your inventory and business operations!
- 10 Essential Tips for Effective Inventory Management
- Inventory Management: 8 Efficient Tactics You Need to Implement
- 5 Key Inventory Reports To Boost Business Growth
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• Written by Adrija Chakravarti
Frequently Asked Questions (FAQs)
A: Inventory management is defined as the process in which businesses track their current inventory, identify what stock to order and how much, and ensure there is enough inventory to match customer demand. This includes managing raw materials, components and finished products as well as storage and processing.
A: Inventory management software is a tool that provides you with a centralised view of your various processes and inventory management tasks. It can track inventory levels, identify restocking needs, automate re-ordering, organise customer and supplier information. With it, you can effectively and automatically manage inventory.
A: Yes, inventory management software can help you automate the process of generating inventory reports. Using data it has collected from managing your business, it can provide real-time insights, customisable reporting, and accurate information. Inventory management software can enhance the accuracy, efficiency, and overall effectiveness of your inventory reporting process.
