Proper inventory management is crucial for any business be it small retail stores, ecommerce businesses, or any other business operating from multiple warehouses. Poor record keeping, delays in purchase orders, and disintegrated accounting systems cause wastage of money and even losses through out-of-stock situations. Cloud-based inventory management tools are useful for such businesses since they help manage inventory records.
In this blog, we will discuss what cloud-based inventory tools are, their importance for U.S. businesses, and the necessary considerations when choosing a platform. We will also look at the implementation costs of cloud-based inventory tools, accounting integration, and the need for professional bookkeeping.
What Is Cloud-Based Inventory Management Software, and How Does It Work?
Cloud-based inventory management systems enable businesses to track their inventory, manage inventory transactions, and control their purchasing processes via a web-based system. In contrast to spreadsheet or software-based solutions that require installation on individual computers, cloud-based systems provide access to inventory data from any location.
Understanding Cloud-Based Inventory Management
The cloud inventory software keeps the company's data stored on remote servers owned by the software vendor. The authorized user can access the software using compatible web browsers or applications as per the software used. Thus, purchasing staff, warehouse workers, and the business owner can make use of the shared inventory data.
For instance, whenever a sale is made by a retailer, the inventory system can be configured to keep track of the stock and make changes to the quantity sold. However, it is dependent upon the correct configuration of the system, as well as the accurate entry of stock movement details.
How Real-Time Inventory Tracking Works
Inventory tracking in real time captures changes that happen as the transaction takes place. This means that whenever an item is received, moved around, sold, or returned, then the inventory is updated in the process. Organizations can use this information to track availability levels, see which items have low levels of stock and therefore know when to acquire more stock.
This can be made easier through barcode scanning or integration with warehouse facilities. Businesses working with different locations can track inventory in each facility individually and help employees to find out where products are available.
Cloud Inventory Systems vs. Traditional Inventory Methods
For companies with a small number of items and transactions, spreadsheets or paper record-keeping could work perfectly. In some cases, however, they might become complicated to manage due to an increase in the number of transactions or distribution of the inventory in several places. Manually updating the database might result in duplicates and inaccurate information.
Cloud computing offers the benefits of centralization, automation, and integration possibilities, but it involves extra costs and depends on the availability of the provider's service. One must understand these differences and not assume that all cloud solutions are bound to save money.
Key Benefits and Features of Cloud-Based Inventory Management Software
Inventory software can help increase transparency and help firms integrate their purchasing, selling, and warehousing activities. It is the effectiveness with which the functions of such systems resolve the problems of the firm that make them valuable.
Improved Inventory Accuracy and Stock Control
Having the proper records on inventory can help a business know what products are available, what products require restocking, and where the products are. The cloud can help in maintaining the centralization of information on products, logging the movements of inventory, and generating reports that show the amount of inventory available and the movements made.
Most systems have alert mechanisms to notify when there are few products remaining and when to restock. However, it is important for businesses to keep having periodic physical counts of inventory.
Automated Purchasing and Inventory Forecasting
Inventory management software could help streamline some elements of the buying process by providing alerts for replenishing, arranging suppliers' details, and creating purchase orders. There are programs that even use sales history and inventory turnover information to forecast future demand.
Forecasting can be useful in planning the purchases when there is a change in season or increased demand. But the accuracy of forecasts depends on the quality of historical data, and there can be no guarantee of forecasting changes in the market that cannot be predicted.
Accounting, Ecommerce, and Multi-Location Integration
The ability to integrate is especially important for companies that have sales across multiple channels. Introducing your inventory management software to your ecommerce site and your point-of-sale systems as well as accounting solutions will help eliminate any redundancy in data input.
For instance, when you integrate your inventory solution with QuickBooks, it will provide purchase, sale, and inventory data for bookkeeping purposes. It is essential to find out which data is synced, how often it updates, and whether your valuation method is supported.
Essential inventory management features
Use this checklist when comparing software demonstrations and subscription plans.
- Real-time stock tracking
- Barcode or QR code scanning
- Automated reorder alerts
- Purchase order management
- Multi-location inventory tracking
- Accounting software integration
- Ecommerce and POS integration
- Inventory valuation and reporting
- User permissions and audit trails
- Data backup and export options
How to Choose the Best Inventory Management Software for Your Business
Choosing an inventory management system involves several things to consider such as operational requirements, cost of implementing the system, current technology and growth prospects. What might work for a sole trader could be inappropriate for a bigger distributor due to lack of warehousing or reporting facilities.
Evaluate Your Business Requirements and Budget
Begin by assessing the existing inventory management problems. This can range from stock count errors, stock-outs, surplus inventory, manual procurement process, to having difficulty integrating multiple selling channels. Listing out these existing problems will make it easier to find the required features for your business processes.
Another thing that businesses should do is compute the total cost of ownership instead of just comparing the subscription costs. Think about the costs related to setting up the software, migrating data, training employees, adding more users, integration, support, and upgrades. A cheaper subscription cost may not necessarily mean cheaper total cost of ownership.
Compare Software Features and Integration Capabilities
Generate a shortlist of systems that fit your inventory volumes, product lines, warehouse locations, and sales channels. Request a demonstration on how the system functions with your business processes, including purchase order creation, goods receipt, order fulfillment, return management, and reporting.
Integration with your accounting system is especially important. You will want to ensure that the system passes your inventory costs and sales transactions into the correct place within your accounting system. If you use QuickBooks or some other accounting software, then you need to determine whether additional software is needed.
|
Business requirement |
Feature to evaluate |
Operational purpose |
|
Frequent stock shortages |
Reorder alerts |
Identify replenishment needs |
|
Multiple warehouses |
Location-based tracking |
Monitor stock across facilities |
|
High transaction volume |
Barcode scanning |
Reduce manual data entry |
|
Multiple sales channels |
Ecommerce and POS integration |
Coordinate inventory updates |
|
Complex purchasing |
Purchase order automation |
Organize supplier transactions |
|
Financial reporting |
Accounting integration |
Support inventory reconciliation |
|
Growing workforce |
User permissions |
Control access to inventory records |
Test Security, Performance, and Scalability
Prior to subscribing, conduct testing using a free trial or demonstration of the software to see how it works using actual transactions. Have the staff who will work with the software test the ease of navigation, data entry and reporting processes. Testing can uncover restrictions that will not be obvious from marketing information.
Look into the software provider’s security measures, authentication methods, backup system, service uptime, customer service, and ability to extract data. Companies that plan to grow in the future should determine whether the system will allow for expansion or whether a brand new system will need to be purchased.
Inventory management systems in the cloud can help organizations enhance visibility of their stock, automate purchase processes, and harmonize their inventory across different locations and sales platforms. Functions like barcode scanning, reordering notifications, forecasting, and accounting integration can assist in saving time and make the purchase process more rational.
Nevertheless, choosing the appropriate system involves much more than simply comparing its features. It is important to assess the costs of implementation, software compatibility, the need for training, security, and scalability. The process of inventory reconciliation and accounting will still be crucial despite the automation.
The Fino Partners provides outsourced accounting, bookkeeping, and financial reporting support for U.S. businesses and accounting firms. Our professionals can assist with inventory-related bookkeeping, account reconciliation, cost of goods sold reporting, and maintaining accurate financial records.
