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? Take a free-trial right here!
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Author: Pratibha DevasenapathyA newbie in the world of finance writing with a passion to learn something new each day. Pratibha has shown exponential enthusiasm to understand the world of MSME and financing and has been writing blogs to spread knowledge and understanding of digital marketing and social media. With a vast experience of 6 years in digital content writing, she draws attention towards the importance of digital medium through her words.
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