Effective Inventory Management and Stock Tracking with TidyStock
A law of the universe dictates things will always descend into chaos unless energy is supplied to maintain organisation. This principle applies to galaxies, stars, humans, businesses, and inventory. A recent logistics survey found a dominant concern of companies was poor data hygiene; in other words, most struggle to ensure inventory information is complete, accurate, timely and accessible. The carrying cost of stock is generally held to be between 20% and 30% of stock value, meaning if your stock value is $100k, then you can expect to lose $20k to $30k of this over time because of obsolescence, loss, waste, and over-ordering. Excess inventory is a cash black hole.
Understanding Managed and Unmanaged Items
What's the difference between a managed and unmanaged items in TidyStock and which is the best option for my business? Managed items are equivalent to tracked items in Xero inventory, whereas unmanaged stock is equivalent to untracked items in Xero. In TidyStock, the quantity and average cost of unmanaged items that you purchase to consume/sell in your business can be overwritten. The unit cost and quantity of unmanaged items is not tracked over time, so you cannot see a history of sales, purchases, adjustments, or credits through the material item history screen or the Stock History Report. Items that you assign as unmanaged are generally things that you use quickly and are of low value or importance to your business, such as stationery supplies or freight.
Conversely, when items are managed in Tidy, the only way to change the stock level is through a Sale, Purchase Order, Credit or Adjustment. Tidy uses a perpetual inventory management system to track managed items, meaning every time a managed item is bought, sold or used, those details are tracked, allowing you to see changes such as the unit cost over time. Generally, high value inventory items, in terms of cost or value to your business operations, should be managed items. Furthermore, if your business handles items with expiry dates, you will need to enable batches in TidyStock, and to do this, items must be managed.
Key Benefits of Managed Items
By assigning managed items in TidyStock you can:
- Track costs of inventory items over time
- Produce a stock on hand report, without having to spend time and resources doing a manual stock take
- Report on stock levels for specific dates
- Keep note of reasons for all inventory changes
- Update the value of your inventory in Xero every time a transaction is completed
Comparison of Stock Types
| Feature | Managed Items | Unmanaged Items |
|---|---|---|
| Xero Inventory Type | Tracked items | Untracked items |
| Stock Level Changes | Sale, Purchase Order, Credit or Adjustment | Can be overwritten |
| Tracking System | Perpetual inventory management | Not tracked over time |
| Business Value | High value or essential operations | Low value consumables |
| Cost Method | Calculated average cost | Manual unit cost entry |
Good Inventory Practices and Data Hygiene
Good data hygiene with TidyStock starts with the reminder that data should only be necessary and sufficient - not too much and not too little. Don't make things too complex, especially with names and item numbers. It's important to categorise well, as it is the first level of inventory organisation. Commodity categorisation is usually the best (e.g., Steel, Aluminium, Chemicals), as it allows you better reporting plus the ability to negotiate with and consolidate suppliers. Restrict to major commodities, 20 to 30 at most, to quickly show where most of the company's cash is going.
Item Numbering and Names
Item names should always be constructed as Object Name (Noun), adjective 1, adjective 2, …, dimensions, colour. This adjective sequence runs from least variation to most variation because it sorts items into neat, easily identifiable groups. Regarding codes, best practice tends to meaningless codes, which are usually a short, sequential number for any item. Meaningless codes are short and easy to remember, do not limit the number of items, and do not need decoding skills. Tidy auto-numbering will preface a sequential number with a M prefix, providing much more assurance that your stock levels are true and accurate.
