To help teams overcome this, below is a guide to inventory asset management for small businesses. Overall, keeping accurate inventory records is essential for business performance and customer satisfaction and helps you stay on track with your financing and marketing goals. Because inventory is vital for business functions, your counts should be as accurate as possible.

• This can lead to inventory accuracy problems when it’s not being stored professionally or managed in a warehouse.
• You can even access a performance report that will provide an overview of the completed or missed deliveries by the drivers.
• It’s about ensuring that the actual quantity of an item in the warehouse matches the number in the company’s records.
• An average inventory accuracy rate that many businesses maintain is between 60% to 70%.

Inventory accuracy is essential for avoiding stockouts, shortages, and shrinkage, as well as controlling inventory quality and providing a positive customer experience. Inventory accuracy is important because it provides business owners with clear insight into their stock and inventory levels. A large number of inventory inaccuracies could mean customer get the wrong orders, you have a shortage of product, you’re experiencing theft, your products have.

What are the main goals of inventory accuracy?

Achieving consistent inventory accuracy is a daunting task for businesses across sectors. Common challenges include manual data entry mistakes, outdated inventory tracking tools, disorganized warehouses, inefficient restocking processes, and inadequate employee training. This metric gauges how closely a company’s documented stock levels align with the actual capital employed formula calculation and examples physical stock. For instance, if the documented stock count is 1,000 units and the actual count is 950 units, the inventory accuracy percentage is 95%. A business can track inventory on paper or spreadsheets if its inventory management system is sub-standard or non-existent. However, this inventory accuracy formula won’t be very tenable for long.

We hope this article has given you a better understanding of what inventory accuracy is and how to achieve it. Allison Champion leads marketing communication at Flowspace, where she works to develop content that addresses the unique challenges facing modern brands in omnichannel eCommerce. She has more than a decade of experience in content development and marketing. Discrepancies can crop up if too many people are entering your stockroom and disrupting its harmony. Limit who can access your inventory to prevent this from becoming unmanageable.

Method 1: Using Physical Counts

Measure the accuracy of your inventory variance estimates with an eye toward increasing your bottom line. Implement just-in-time inventory management principles to reduce the chances of overstocking or understocking. Analyse historical data and customer demand patterns to forecast future needs accurately and align your replenishment processes accordingly. For example, finding that one of your products only has 40% inventory accuracy is a significant problem. Solving this issue would take an extended period of evaluation and checking each item against inventory records, buying records and online data.

In other words, it’s the difference between your records and what’s actually on the shelves. It’s important to keep track of stock to inform customers about which of your products are available and which aren’t. An accurate inventory also lets you plan around future shortages and demands. By keeping track of your production stock and raw materials, you can account for existing products and know when you need to make more.

What is the average inventory accuracy?

The benchmark for inventory accuracy is 97% or above, but most companies only achieve an average inventory accuracy rate of 65%-75%. Keep in mind that the possibility of inventory data errors increases as your business sells more products. Your operations costs can be greatly reduced with inventory accuracy accounting. The inventory tracking reveals which products are selling well and which are not. Having a SKU (stock-keeping unit) that does not sell will increase your carrying and operating costs. Companies typically use two major ways to calculate inventory accuracy.

Adopt the cycle count program

The worst part about order fulfillment errors is that your inventory counts will be off before you even receive the shipment. Then, divide it by the inventory value you’re supposed to have on hand. The merchandise you’re supposed to have at your warehouse can be found in whatever system you use to track inventory data. When your products are in stock and ready to ship, it creates a smooth fulfillment process.

With thorough training, your team can apply the correct codes before placing items back in stock. With uniform bins and pallets and an inventory labeling program, you can avoid confusion for your pickers and set your counting teams up for success. To succeed in competitive markets, small business owners must be able to identify areas in which improvements can be made. By developing a system in which all essential assets are continually and automatically monitored, precise optimizations can be realistically pursued. Using some type of scanner to track inventory is crucial the keep track of your numbers.

What is Physical Stock? Meaning, Types, Steps & Best Practices of Physical Inventory Counting Methods in 2023

This discrepancy amounted to 150 laptops, enabling necessary corrections. Reach out now and discover how a fulfillment company such as Flowspace can assist in preventing or handling overstock and fine-tuning your inventory management strategies. By placing a RFID tag on each stock that we receive, we’ve automated a significant portion of the process. As these tags get scanned, the inventory count gets automatically updated.

Here are some of the reasons why maintaining inventory accuracy is so important. Cogsy has all the functionality to keep your stock levels accurate, from data monitoring to predictive inventory intelligence to enhanced reordering practices. This visibility into your inventory levels also reduces the scope of errors since you can tackle any issues as soon as they arise.

If inventory has been an Achilles heel in your quest to omnichannel success, this is a solution worth implementing. It can also help in other business areas, including preventing theft and tracking how product moves about your store. A warehouse management system (WMS) can make a huge difference in your cycle counting process and drive proactive behavior instead of reactive behavior. The system can generate daily counts by using real-time data to immediately notify someone when a mispick occurs.