How Re-order Level of Stock Helps Keep Your Company’s Financial Health Stable
Optimum stock is
the key to manage inventory successfully.
Overstocking will lead to blockage of cash and add up to certain risks such as
price fluctuation, cost of managing excess stock, dead stock etc. This means
that excessive stock may lead your business into losses.
Detecting the
correct re-order level is extremely crucial. If an order is placed too soon, it
would incur extra costs which include, warehousing rent, opportunity cost, etc.
These costs are classified as “carrying costs” which also affects the overall
financial health of your business. However, if the company places an order too
late, it would result in stock-out costs, for example lost sales, etc
Some of the most
crucial benefits apart of keeping your company’s finances steady which re-order
levels of inventory reap are:
- Automatic
generation of a replenishment order at the appropriate time by comparison
of stock level against re-order level inventory controls
- Appropriate
for widely differing types of inventory within the same firm
- This
report will help you in taking the appropriate decision for timely
Purchase of Materials and will readily provide all relevant information
required for placement of a Purchase Order.
- Monitoring
stock levels to see when the “re-order point” has been reached. The
re-order point is the point at which the stock gets low enough that it’s
time to order further stock.
Maintaining a
company’s financial health remains a top priority for any business owner and accurate
management of inventory triggers that. Reordering of your stock without
incurring any additional expenses could be a bit challenging but it certainly
isn’t impossible. Especially with a software as flexible and reliable as Tally,
you can ensure that you never run out of stock.
To simply
put, Tally.ERP 9 accepts the
quantities that you want to specify. In advanced mode, it considers the
previous consumption patterns to suggest re-order levels. However, you can
define your own reorder levels. You can also specify the minimum quantity of
the item to be ordered, either in simple or in advanced mode. Keen to explore
more about of stock?
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