Demystifying inventory reporting: how to understand inventory reports

22 Dec 2020

All inventory businesses should be carrying out regular inventory reporting, but that’s not the reality for many busy businesses. Although it might feel like a ‘when I have time’ extra, we’re going to argue differently.

Your inventory reports summarise your stock levels, sales data and more, to give you crucial information about your inventory. Having this information on hand and up to date is a vital tool for smart decision making when it comes to inventory.

But some complex-sounding metrics involved in inventory reporting can put businesses off. That’s why we’re here to demystify it and help you get started with inventory reporting.

What does Cost of Goods Sold mean?

Cost of Goods Sold (aka COGS), is a metric which looks at how much it costs to produce the goods you are selling. COGS will include the direct costs of the materials used to make a product and the labour input cost, but it won’t include indirect costs like delivery costs.

It’s important to know the COGS for your inventory so you can calculate profitability. Calculating your margins is much simpler with an accurate Cost of Goods, so this is one to get right. Workhorse makes this figure easy to find with your automatic inventory reports. In your Workhorse system you can see the breakdown of COG by SKU.

What does Stock on Hand Value mean?

Stock on Hand Value (SOH) is referring to the total value of all the stock you currently have available to sell. It’s important to note that this doesn’t include any products you have on order that haven’t arrived yet.

Knowing this metric allows you to improve your accounting management as you understand how much cash is being held in inventory. Workhorse gives you a stock-check tool for easily accessing this information, and it keeps track of available stock on hand for you.

What does Days Sales of Inventory mean?

Days Sales of Inventory (DSI) is the average number of days it takes your business to sell inventory. This metric is important because it gives you oversight of how quickly your inventory is turning over and can help identify issues with slow-to-sell products.

Understanding DSI might help you to reduce issues with stock perishing in your warehouse by reducing stock holdings. This is a great example of how gaining a more in-depth, analytical view of your inventory can save you money.

Equipped with an understanding of what these metrics are and how they can help your business with stock holdings, it’s time to get started on regular inventory reporting. To find out more, read our blog about running inventory reports: what you need to know.

If you’re looking for inventory management software that makes inventory tracking simpler, book your Workhorse demo today.

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