No matter the size or line of business, virtually all businesses must be able to generate and manage financial and inventory balance reports.
The former as part of the legal and tax compliance regime, while the latter are necessary for:
- Sell better
- Maintaining process efficiency
- Avoiding stock-outs
- Prevent losses
- And therefore, save money
There is data showing that companies that manage their inventory balance and reporting correctly can reduce their delivery times by up to 50%, which saves money and improves customer satisfaction.
But there's more; according to Asset Infinity efficient management of inventory balances can reduce stock-outs by 10-25%.
More on logistics and inventory issues, learn about What is the U.V.A. (Authorized Verification Unit) and what is its job?
What is the inventory balance report?
An inventory balance is a physical or digital record that contains the total amount of inventory a business has on hand, in stock and in stock available to customers.
This report includes data such as the most sold products and allows you to manage, locate and categorize merchandise.
For IBM the most frequent users of an inventory balance sheet are:
- Warehouse managers
- Logistics Supervisors
- Inventory analysts
- And business users
Those who use the inventory balance report to reconcile inventory by comparing and synchronizing it with day-to-day movements.
This record avoids running out of stock or overbuying and can be of several types because the inventory balance report is a document that gathers several partial inventories.
Not only the most or least sold products, but also the merchandise that generates the most profit, the price of each stock and the forecast inventory that allows us to know how much merchandise will be needed to satisfy customer purchases in the future.
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What is an inventory balance report used for?
An inventory report is used for three main purposes:
Inventory management
Your business must know what you have in stock and in stock so that you don't run out of stock before you have fulfilled purchase orders or you will make a loss, known as stock-outs.
On the other hand, storing too much merchandise increases the cost of inventory and the possibility of its loss due to damage, theft or obsolescence.
Precisely, the inventory report is used to know how much and when to buy new merchandise.
Locate the merchandise
An up-to-date inventory balance allows you to know where each Stock Keeping Unit(SKU) is, which results in savings, since fewer movements are needed to locate the merchandise.
In addition, the inventory report is used to know the location of items:
- Purchased by date
- Purchased by a specific supplier
- Returned
- Excluded or disincorporated for any reason
Inventory categorization
An up-to-date inventory balance allows you to track items through the supply chain and also to identify the cost of goods sold for tax and accounting purposes.
In case you are interested, we bring you the guide to tax warehousing in Mexico.
How to create an inventory balance sheet?
Although Excel spreadsheets can be used for any inventory reporting, it is ideal to use programs that link supplier deliveries and customer orders in an automatically updating platform, such as an ERP.
However, here are the steps to perform an inventory balance manually or in a spreadsheet for a small business:
1) Create a column for inventory report items.
This step consists of listing each SKU in a vertical column.
2) Create a column for descriptions
This other column provides an additional description of each SKU.
3) Assigns price to each item
The price of each item included in the previous two columns is listed here. Depending on the type of business it may be necessary to identify the purchase or manufacturing cost separately from the selling price.
4) Create a column for updating the inventory balance.
Here you update what exists in the inventory after comparing the new purchase orders with the sales orders.
5) Select a period to update inventory balance
This step will depend on the needs of the business. For example, the higher the sales volume, the more frequently it will need to be updated.
English proficiency ShipBop offers other tips for creating an inventory report.
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How to take advantage of inventory reports?
Although inventory balance reports are useful in all areas of a business, they can be most helpful in these areas:
Control and traceability
Businesses that improvise lose money, which is why inventory reports require a logistical plan that fixes:
- Dates
- Deadlines
- Frequencies
- Location
- And personal
For the activities mentioned above.
The right assortment of all SKUs
SKUs must be distributed between the warehouse and the stock accessed by customers in a so-called 'even level' strategy that allows for the uninterrupted flow of sales.
It is also possible to redistribute warehouse items under an A-B-C report:
- Zone A: The most important ones, between 15 or 20% of the stocks that account for 70-80% of the inventory value.
- Zone B: Of relative importance, 20%-15% of the items that concentrate 20-15% of the value.
- Zone C: Miscellaneous or trivial, 60-70% of the items representing at most 20% of the inventory value.
So the most accessible places in the warehouse will be those items with the highest value, profit or turnover.
Enables warehouse counting
A good inventory balance management saves time, among other things because it allows counting in the warehouse and this means higher worker productivity.
Appropriate treatment of goods that are about to expire or have expired
This is particularly relevant when the inventory consists of perishable goods or when their cost fluctuates regularly, conditions that are expressed in the PEPS (first-in-first-out or FIFO) and UEPS (last-in-first-out or LIFO) rules.
FIFO inventory rules apply to products that expire or become obsolete, while LIFO rules are used to avoid losses on goods that are not perishable, but fluctuate in price so that current prices must be used to calculate cost.
Inventory Balance Sheet Report - To Finish
Inventory balance reports are necessary in all types of businesses regardless of size or line of business, although it is vital in those that are dedicated to the eCommerce and retail sales.
Proper management saves money and builds loyalty among customers, who will trust those vendors who always provide them with the assortment they need.
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