Inventory management crucial as economy improves

News Article - 26 February 2010
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As Britain exits recession, inventory management skills will be tested as businesses attempt to align supply with demand. Account managers are now faced with the difficult prospect of balancing future stock projections (based on perceived demand) with cashflow, in addition to meeting accounting norms.

In the past two years, six successive quarters of negative growth have seen the largest decline in national output since 1931, leaving companies with uncertainty over long-term operations. Faced with this uncertain economic future, companies are finding it increasingly difficult to make accurate financial projections and use these projections to stabilise stock levels.

Stock inventory is a difficult task at best in positive economic times, made harder in the post-recession climate by lower levels of cash assets in addition to abnormal market conditions. The accounting preference for FIFO (first in, first out) as opposed to LIFO (last in, first out) inventory accounting means businesses are unable to report lower levels of income to reduce taxation.

Small and medium sized businesses face other hurdles, in particular many struggle to receive financing from high street banks who consider the deals too risky. Without the cashflow needed to ‘stock up’ SMEs may find it difficult to meet demand effectively, as competition for market share becomes more aggressive and Britain exits recession.

As the economic outlook improves, all business systems are likely to face further strain as consumer demand for products and services increases. Fast and efficient communication links providing usable data should be present if companies are to meet demand successfully. In particular, businesses unable to match stock levels with demand may quickly become overwhelmed if economic conditions mismatch with projections.

Access are advising UK companies how a business software solution can improve communication channels and allow more forward-thinking projections to be made on the back of real-time, usable data. Inventory management software can provide companies with the ‘true costs’ of stock items, allowing valuations such as FIFO to be made easily and efficiently. In addition, the package can facilitate graphical ‘what if’ scenarios through its stock forecasting facilities, giving companies greater power over financial projections.

Please call Access on 0845 345 3300 for more information.

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