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CONTROLLING YOUR INVENTORY , Part 2

© Barbara Massie

In the last article we told the importance of keeping an inventory for your craft business. How to do it as a manufacturer when you purchase materials to create a finished item. How to do it when you sell the finished items to the public as a retailer. Each function has its own method of inventory.

INVENTORY CONTROL - Manufacturer Create a chart with columns for each of the headings listed below: date, materials purchased, number purchased, cost per item, number used, number left, cost of items on hand.

This creates a worksheet to monitor all supplies purchased and the cost of all supplies used in an item. For example, with the chart you will always know how many earring wires you bought, how much each wire costs and how much it costs to make a pair of earrings.

INVENTORY CONTROL - Retailer

Create another chart with columns with these headings: date, item completed, cost per item, number completed, number sold, number on shelves, number stored, cost of items on hand.

This worksheet shows an inventory of the items completed and made for sale. It shows how many items are on hand for sale. With the cost per item listed, it will help in calculating the price to charge.

In addition to paper records of inventory, a physical inventory should be taken periodically to confirm that quantities on hand equal those shown on paper inventory records. This means that you will look at every item stored or out for sale and physically count the items. Paper records are then adjusted to reflect any differences that show up in the physical count.

There is one software company, ADS Software, Inc., that advertises software with "Physical Inventory Listing." Read their description at: ADS Business Software/Inventory.

A current manufacturer inventory report shows which supplies are used and need to be purchased. It is frustrating to be in the middle of a project, discover the country blue paint is completely gone and the stores are closed. Use the report to replenish supplies as they are depleted.

Your retailer inventory report shows sales of items and helps determine which are profitable. Twenty percent of your inventory may produce 80 percent of your sales. The fastest-selling item may produce the highest percentage of sales, but not necessarily the highest percentage of profit. Constant analysis of your records determines what is selling the fastest and what is profitable.

Keep in mind that the cost of inventory used to make product is not solely the total shown on the bottom of the invoice. It is also the cost of shipping/handling, the interest on the money borrowed to buy the supplies or the interest on the charge card you used, depreciation, overhead such as insurance, etc. Inventory carrying cost is actually 10 to 25 percent above the price paid. This needs to be considered when setting price.

The copyright of the article CONTROLLING YOUR INVENTORY , Part 2 in Crafts is owned by Barbara Massie. Permission to republish CONTROLLING YOUR INVENTORY , Part 2 in print or online must be granted by the author in writing.