Basics Of Maintaining Inventory

inventory management basics

Typically, when you have been in business for some time, your inventory tracking system should be able to tell you when to buy, what to buy and how much to buy.

For business startup, this projection gets to be a little difficult because you don’t have any previous sales figures to base your sales expectation on.

The amount of money that is budgeted to purchase inventory for a certain period of time which could be one month, two months or four months, is known as open to buy. The open to buy amount is calculated by using the following formula.

Planned inventory $20,000 plus planned sales $20,000 which equals $40,000 from this you reduce the actual inventory minus $15,000 as well as the stock that has already been ordered mine is $10,000 in. This gives you the open to buy amount of which equals to $15,000.

Apart from calculating the open to buy amount on a regular basis, many businesses dealing in seasonal products also figure in the season variations to accommodate seasonal sales fluctuations.

Even if your business is not a season one, most of the businesses experience some sort of fluctuation, most often an increase, in the sales of their merchandise during on season times such as during holiday season.

In these circumstances, it is recommended that you do not restrict yourself to the open to buy amount and consider going beyond the budget or use less than the entire amount. In fact, if your business anticipates to sell non-regular items during the season, you can reduce the open by amount for the regular merchandise to accommodate un-anticipated items and sales.

For the business startup that does not have existing sales figure 2 calculate exact amounts, the business plan should be able to guide you towards calculating the open to buy amount.

The business plan should help you calculate the gross sales that you need to pay to keep the business afloat as well as other overhead costs. Your business plan should give you a realistic idea of the basic stock levels and the monthly or season sale volumes need to have during the startup. Once you have been in business for several months, your inventory tracking system will provide this information for you.

Trade shows are great opportunity to show off your products and business to the public, consumers as well as finding potential suppliers.

It also presents you with the opportunity to evaluate your competition. They can be a great place to develop networking which will serve your business in the future when you need to expand or diversify. To find a trade show in your area, visit the trade show news, which is an online directory of more than 17,500 trade shows and conferences.

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