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Last updated: 26 Oct, 2021  

Accounting.9.Thmb.jpg How deploying accounting software can ease inventory management for MSMEs

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Anand Jajodia, Co-founder of Alignbooks | 26 Oct, 2021

What is Inventory?
Inventory is one of the most important building blocks for every business. As a small business, it can be challenging to purchase a large number of raw materials in advance due to a capital crunch. However, managing inventory is crucial as it can either make it or break your business. Investing in an inventory management system can be a good place to start. It is important to simultaneously adopt a few well-tested strategies to manage your inventory effectively.

What is Inventory Management?
Before we dive into the importance of Enterprise Resource Planning systems (ERPs), let us understand the basics of inventory management. Inventory management is essentially the process of managing inventory in a manner so that costs are optimized while scaling your business. It includes elements such as storage of inventory, overseeing the inventory orders, and stocking the right amount to minimize wastage. Without a good inventory management system, meeting production needs can become challenging. This can cost you money, time, customers, and even your reputation.

What Are Cost Efficiencies?
Managing cost is core to running a business. The means of managing working capital is prime to the success of a business. Inventory is one of the key elements of working capital. Having a high working capital translates to a longer realisation cycle. This would ultimately lead to a higher capital financing cost, be it owned or borrowed capital.

How Can the Costs be Optimised?
There are a few ways in which costs of a company can be optimized. Here are some of them.

● Shorter working capital cycles

● Insights into supply and demand

○ Fast and slow moving stocks

○ Inventory options that are just in time

○ Critical stocks

○ Minimum order quantity

● Timely vendor payment especially in cases of critical and high-demand inventories

How ERP Systems Help Inventory Management
Investing in an ERP system for your business is one of the smartest decisions you can make. Many businesses tend to lean towards using spreadsheets to carry out their operations. However, spreadsheets come with several challenges like human error, missing information leading to incorrect inventory requirements amongst others. With an ERP solution, there is no room for human error. In addition, ERP systems automatically integrate with the other existing systems of your business and thereby enable efficient operations. There are plenty of ERPs available in the market. No two ERPs offer the same benefits, features, or functionalities. Here are some areas in which ERPs can help your business perform seamlessly:

● Stock tracking and storage management

● Automation of processes and order management

● Insights into business intelligence and analytics

● Payment gateway for seamless payments

● Notifications and alerts

● Managing accounts receivable and accounts payable

● Facilitating transactions between businesses and lenders

By assisting across these areas, ERP systems can help your business function seamlessly and help you rise to greater heights.

4 Reasons Why SMEs Should Adopt ERP Systems
With the advent of technology, every business has leveraged digital solutions to improve its efficiency and business outcomes. ERPs have evolved to become the backbone of businesses thereby enabling companies to have a competitive edge in the industry. To improve and scale your business, ERP is absolutely important. Let us have a look at 4 reasons why you should adopt ERP systems.

1. Automation
ERPs provide 360-degree coverage for your business ranging from HR and production to marketing and sales. It can save you and your team both time and money by eliminating the manual processing of redundant tasks. With automation, there is no scope for human error, and potential discrepancies can be avoided.

2. Cut Costs
Typically, companies invest in different systems for each task. Instead, it can be more cost-efficient to invest in an ERP system that can handle different aspects of your business in one place.

3. Inventory Tracking
To maintain an accurate pipeline of products, it is crucial to understand the stock of your inventory. Inventory management systems by themselves cannot effectively optimize your inventory unless it is integrated with the entire workflow. ERPs integrate your inventory systems with the rest of your operations. It helps streamline business processes and helps in production and planning.

4. Forecast, Restock, and Manage
ERP systems keep track of your sales, purchases, and logistics all in one place so that you can match your inventory levels with your business needs. Insights on real-time stock levels can help you either replenish or return inventory depending on your requirements.

On-Line vs Off-Line ERPs
Online and offline ERP have their benefits. However, most companies use online ERPs. Let us have a look at the pros and cons of online ERPs.


● The entire application and data can be stored on cloud with advanced computing capacities.

● Accessible 24x7 on any device

● Gives businesses a competitive advantage by helping them make smart decisions and enhance customer and vendor experience.


● The security varies on the credibility of the service provider

In a Nutshell
With customers becoming more aware of products and features, they tend to prefer companies that actively listen to them. ERPs can help you meet all of your business needs in a seamless manner. Technology has allowed SMEs to bridge the gap with corporate businesses. With ERPs, SMEs can be efficient and be smart about meeting their goals. ERPs are also cost-efficient leading to more profitability for the company, thereby ensuring sustainability.

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