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Inventory shrinkage refers to the difference
between the inventory you have on hand and what it should be according
to sales records and purchase orders.
According to retail industry studies, this difference
can be substantial, from 2 percent to 5 percent annually. A good
integrated point-of-sale (POS) solution can cut this figure in half by
addressing the two major contributors to shrinkage: internal theft and
inaccurate paperwork.
There are many ways to deal with internal theft issues, including
positive reinforcement and good security procedures. Discovering the
underlying reasons why internal theft occurs and making changes is
important. To eliminate inaccurate paperwork and reduce errors, a
well-integrated POS system (such as Windward System Five and others)
will help reduce inventory shrinkage to a minimum. A POS system can not
only track inventory but optimize your use of inventory. It can:
- Reconcile billings and purchase orders. This can be done quickly and
accurately, which will help you avoid overpaying or, worse, paying
twice!
- Read barcodes. This will eliminate confusion, as properly
bar-coded and
labeled stock can't be accidentally sold as something else. The POS
system you choose should be able to generate and print unique barcodes
or allow you to use manufacturers’ barcodes.
- Allow the use of data collectors to scan inventory and keep accurate
counts. The latest wireless models make frequent mini-inventory counts
quick and easy.
- Print receiving reports. These reports should be matched to packing
slips, making it easy for your receiver to detect short shipments and
other discrepancies. This will ensure the accuracy of new inventory.
- Keep track of special orders and back orders. Your POS system should
keep you up to date on the status of all orders by supplier and
individual inventory item.
- Keep track of RMAs. You can make sure you're getting proper credit
from your suppliers. Inaccuracies here can quickly add up to a
substantial amount.
- Record superseding parts properly. You don’t want inventory to be
incorrectly written off as obsolete. Your POS system can easily prompt
you with correct information and alternatives.
- Track aged inventory and FIFO (first in, first out) to optimize your
inventory value when selling stock.
- Use alternate supplier tracking. This will ensure that you get the
best price for your orders.
- Prompt you with “pay by” dates. This will allow you to take advantage
of discounts available for paying early and track the amounts saved as
well as ensure that you meet regular payments.
- Help you buy what you need, not what you think you need. Your POS can
prompt you on what to order based on sales history, established high and
lows, and seasonal adjustments, rather than on guesses. However, make
sure the system lets you enter gut-instinct purchases that you feel
strongly about.
- Help you negotiate better discounts from suppliers by tracking sales
volumes from your end. You won’t want to have to trust their records
alone.
Obviously, if you can put even 2 percent of your annual inventory costs
back in your pocket, you will be able to maximize your business
investment. You can use your savings to better grow your company, and it
can even pay for your new POS system. Security safeguards and the right
POS software system will result in greater savings, improved efficiency,
and higher customer satisfaction.
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