How to improve your stock control

Managing your stock is an important part of running your business. The only companies that don't have to worry about it are ones that deal purely with intellectual property...

Everyone else - retailers, resellers, manufacturers and service providers - need to have accurate and up to date lists of what they do and don't have in stock.
They also need to ensure they don't run out of key items. If they do not keep up to date they run the risk of making promises they can't keep to customers.

For example, a plumber who has pledged to complete a bathroom installation by Friday will come unstuck if he suddenly finds out he has no gold finish taps (as specifically requested) and can't get any till the following Tuesday.

The plumber will have to persuade his suppliers to rush the missing taps over to him and may have to pay extra for the privilege, or he will have to apologise to the customer for running late. This could affect his business reputation and could eat into his margins if he finds himself offering a compensatory discount.

Of course the plumber could order in more gold finish taps than he thinks he'll ever need to ensure he's never put in this stressful situation, but that's not a good solution either. If gold finish taps are no longer de riguer he will have lots of stock on his hands that he can’t shift. Cash he could have spent on more immediate needs is tied up, and on top of that he has to find, and possibly pay for, storage and security for the faucets.

The plumber - and every business dealing in stock - needs to develop a stock management process that ensures he always has enough of what he needs but doesn't end up with too much of it.

Set minimum re-order levels

If you haven't done so already, you need to note down what stock you currently hold and how long it takes to re-order each item. You should look at how regularly you sell each piece of stock, on average, and set a minimum re-order level when you reach a point that would take that you below that average. The plumber, for example, sells 5 pairs of gold taps a week and it takes seven days for his supplier to deliver a new order. His minimum re-order point should be at least 5 to ensure he always has enough taps in stock. Bookkeeping software, such as that included in the Barclays Business Manager package, often includes a feature which allows you to set a minimum re-order level and then reminds you when you need to re-order.

Record every sale of a stock item

Every time you sell a piece of stock you should record it in your books. If you are using bookkeeping software, this can be done automatically when you create a document which lists the sale of stock parts (e.g. an invoice). You should do this as soon as possible after agreeing a sale with a customer to make sure you don't end up selling the same stock part twice.

Check your records before you make any promises

Before you make any promises to your customers you should check whether or not you already have - or can get in time - the necessary items. This will stop you having to go back on your word later. If you don't have everything you need in stock, at least tell them when you will expect to be able to deliver it.

Keep on good terms with your suppliers

Paying your suppliers on time and with a minimum of hassle means they will be more inclined to do you a favour if you do find yourself begging them to put together a rush order.

Treat the customer courteously

If you do find yourself without the necessary stock, contact the customer and explain the situation. You should give them a realistic delivery date and you may want to make amends by offering a discount on this or future orders. If the sale was time sensitive - e.g. a Christmas present - you should be prepared to offer them a full refund. It is better to salvage the customer relationship by being reasonable rather than losing the business forever.

Don't let stock pile up

Don't let stock age and become obsolete. Keeping stock lists up to date means you can easily monitor what is and isn't selling. Lines that are slow can be shifted via discounts, sales and special promotions.