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How do you optimize inventory turnover with accounting software?

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Inventory turnover is a key indicator of how well you manage your inventory and generate sales. It measures how many times you sell and replace your inventory in a given period. A high inventory turnover means you have a strong demand for your products and a low inventory holding cost. A low inventory turnover means you have excess inventory, low sales, or both. In this article, you will learn how to use accounting software to track and improve your inventory turnover.

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1 Why is inventory turnover important?

Inventory turnover has a direct impact on your cash flow, profitability, and customer satisfaction. Keeping track of your inventory turnover can help you to avoid overstocking or understocking your products, which can lead to lost sales, spoilage, or obsolescence. Additionally, it can help you to optimize your inventory levels, reducing your storage, insurance, and handling costs. This, in turn, can increase your sales volume and revenue, boosting your market share and competitiveness, as well as improving your customer service and loyalty, enhancing your reputation and retention.

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2 How to calculate inventory turnover?

To calculate your inventory turnover, you need to know two numbers: your cost of goods sold (COGS) and your average inventory. COGS is the total cost of producing or purchasing the goods you sold in a given period. Average inventory is the average value of your inventory at the beginning and end of the period. You can use this formula to calculate your inventory turnover:

Inventory turnover = COGS / Average inventory

For example, if your COGS for the year was $100,000 and your average inventory was $25,000, your inventory turnover would be:

Inventory turnover = $100,000 / $25,000 = 4

This means you sold and replaced your inventory four times in the year.

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3 How to use accounting software to track inventory turnover?

Accounting software can be a great asset in tracking your inventory turnover, as it can automate the calculation and reporting of your COGS and average inventory. With the right features and functions, you can record and categorize your inventory transactions, like purchases, sales, returns, and adjustments. You can also generate and export inventory reports, such as inventory valuation, inventory aging, and inventory turnover ratio, to analyze and compare your inventory performance, such as by product, category, location, or period. Furthermore, you can set and monitor your inventory goals, such as by target inventory turnover, reorder point, or safety stock.

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Vanessa Joy

Neurospicy Culture Builder & DEI Advocate | Empowering Teams to Thrive.
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Assemblies are very important for many inventory situations. For example, if you manufacture candles, you need to be able to track all of the raw materials, such as the amount of wax, fragrance oils, the vessel, the wick, the labeling, the packaging and more. Each of these items comes in separately, and need to be combined into the whole, finished product. Assemblies help do this by combining all of the individual components, and tracking each component as it comes out of inventory for completion.

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4 How to use accounting software to improve inventory turnover?

Accounting software can be a great asset in improving your inventory turnover, as it can provide you with the necessary insights and recommendations to optimize your inventory management. Depending on the features and functions of your accounting software, you can identify and eliminate slow-moving or obsolete inventory, freeing up both cash and space. Additionally, you can forecast and plan your inventory demand, automating and streamlining your inventory replenishment to reduce ordering and delivery time and cost. Furthermore, you can integrate and synchronize your inventory data, improving accuracy and efficiency.

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5 How to choose the best accounting software for your inventory turnover?

When selecting the best accounting software for your inventory turnover, it is essential to consider a variety of factors, including the size, type, and industry of your business, your budget and preferences, and the compatibility and integration of the software. To make the decision-making process easier, you can use online tools and resources, such as reviews, ratings, comparisons, and demos, to compare and evaluate different accounting software for your inventory turnover. With the right software, you can ensure that your inventory turnover is managed efficiently and effectively.

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Vanessa Joy

Neurospicy Culture Builder & DEI Advocate | Empowering Teams to Thrive.
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Make sure the software includes a detailed assemblies system, as well as the ability to track items to at least three decimal places.

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How do you optimize inventory turnover with accounting software?

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5

1 Why is inventory turnover important?

2 How to calculate inventory turnover?

3 How to use accounting software to track inventory turnover?

4 How to use accounting software to improve inventory turnover?

5 How to choose the best accounting software for your inventory turnover?

Inventory Management

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How do you optimize inventory turnover with accounting software?

1

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3

4

5

1 Why is inventory turnover important?

2 How to calculate inventory turnover?

3 How to use accounting software to track inventory turnover?

4 How to use accounting software to improve inventory turnover?

5 How to choose the best accounting software for your inventory turnover?

Inventory Management

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