Why you should automate inventory tracking with cloud ERP software

Why you should automate inventory tracking with cloud ERP software

Published: 10/28/2014 4:35:22 PM

Many companies rely on manual processes to keep tabs on assets and workflows, and this is especially true of cash-strapped small businesses just starting out with limited resources. This makes sense, as often smaller firms don't think they have a lot to track and thus will opt for greater control for the few things they must note in their records. But, over time, this becomes a wasteful practice for both employees and business leaders. By replacing these manual efforts with automation through cloud ERP software like Intacct, smaller companies will see major results, especially in regard to inventory tracking.

Surveying the current SMB landscape
For the average SMB with any amount of inventory in place, any investment comes down to its ROI and TCO. After all, many smaller firms have to operate on thin profit margins, if they are not running in the red in the first place. According to numbers cited by the U.S. Small Business Association, it cost a new company about $30,000 to get off the ground in 2009, and that figure has likely only gone up in recent years.

Many SMBs operate on thin margins, which is why they may initially be tempted to turn to manual data entry and tools like Excel.

With money tight at the beginning, many SMBs will look to have a very lean operation in place from the get go. The fewer expenses the better, many think. Perhaps this is why the average company in the U.S. has less than 29 days' worth of inventory on hand at any given moment, the Professional Association of Small Business Accountants reported. With time and money tight, it makes sense why SMBs are drawn to manual data entry and widely accessible tools like Microsoft Excel. At the beginning, this workflow often seems budget-friendly and easy to implement, making it very appealing to cash-strapped SMBs with only one or a very small number of employees. According to a survey published last year by Deloitte Consulting, 89 percent of companies use Excel for just compensation, showing just how popular the program still is today.

Why Excel and manual data entry is so problematic
Although it can be very tempting to opt for manual data entry tools like Excel at the beginning, SMBs should resist doing so if at all possible, especially for tracking something as important as inventory. That is because the use of these kinds of tools presents two major problems. For one, spreadsheets and similar solutions are incredibly time consuming. Especially as the company grows, more and more employee time will have to be devoted to spreadsheet maintenance and manual data entry just to attempt to keep tabs on everything over time. This can quickly add up to dozens of hours every month, and SMBs in particular are likely going to be far better off having their few employees devoting themselves to more fruitful pursuits like client acquisition efforts.

In addition, any time manual efforts are part of how a company does business, errors inevitably show up. No human is infallible, and even the most careful employee will introduce errors into the tracking processes sooner or later. According to a 2008 study from Raymond Panko, a Professor of IT Management at the University of Hawaii's Shilder College of Business, 88 percent of spreadsheets reviewed had at least one error in them. Even small errors in inventory tracking can lead to major losses for an SMB.

"88 percent of spreadsheets have at least one error in them."

"A manual inventory system relies heavily on the actions of people, which increases the possibility of human error," Demand Media contributor Chris Joseph wrote. "People might forget to record a transaction or simply miscount the number of goods. This results in needless additional orders that increase the company's inventory carrying costs and use up precious storage space. Inaccurate physical counts could also result in not ordering enough of a product, meaning the business could run out of a crucial item at the wrong time."

How automation, cloud ERP software help save the day
The key to avoiding the errors inherent in Excel and manual data entry is to embrace automation at every step of the process. With tools like barcode scanners and advanced point-of-sale systems in place, businesses can be sure they accurately keep tabs on inventory as soon as it comes in and throughout its entire lifecycle in the store until it is finally sold. By removing the human element as much as possible from inventory tracking, even the smallest company can be sure its records are always in order and not prone to mistakes.

"While manual methods may have their place, most entrepreneurs these days find that computerizing gives them a far wider range of information with far less effort," Entrepreneur.com noted. "Inventory software programs now on the market let you track usage, monitor changes in unit dollar costs, calculate when you need to reorder, and analyze inventory levels on an item-by-item basis."

By adopting cloud ERP software like Intacct, SMBs will have a system that can serve as the central warehouse for all data, including inventory tracking information, and facilitate the automation needed. By opting for a cloud-based system, companies get a solution that is built with automation in mind and is cost-effective. This way, even the smallest firms can get going with automation right away, thus ensuring that manual data entry is never a problem. For example, Odyssey Thera, a California-based drug discovery technology firm with less than 51 employees, was able to save its employees about 50 hours a month that used to be devoted to manual administrative tasks by adopting Intacct, and just about any company can expect to realize similar gains by leveraging cloud ERP software.

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