Inventory to Sales Ratio Report: Beginner's Guide

When it comes to business data, the thing that makes them digestible is reporting. This helps business leaders pinpoint the issues and highlight the successes of the business. One of the most crucial reports is the Inventory to Sales Report.

Want to determine your sales performance? Get an Inventory to Sales Report.

This report shows the relation of sales and inventory through the “Inventory to Sales Ratio”. This is critical for inventory management and control. The Inventory to Sales Ratio serves as a key barometer to the success of your product-based business.

It helps you keep stock of your operations. It contains the ratio of inventory values to the sales fulfilled within a certain period. Say a month. An inventory to sales report shows the on-hand inventory in relation to product orders. For instance, an inventory to sales ratio of 2 indicates that a store has enough products on hand to cover two months of sales.

This report also gleans insights into the success of the production, marketing, and sales strategies. Having this regularly will help you make better data-driven business decisions.

Benefits of Inventory to Sales Ratio Report

The profitability of a business is greatly dependent on monitoring sales and inventory closely. Keeping track of your sales helps you determine which product is slow-moving, which products are being sold quickly and are running stock soon, and other specific information about your sales, inventory levels, and customer preferences. Using the Inventory to Sales Report goes more than inventory control. It helps you find efficient sales strategies, predict sales trends and gauge supply and demand.

Reduce order delays

Stockouts mean lost sales. This upsets the client or buyer and cuts into current and future profits. Worse, you could lose your customers to your competitors who will get similar products you offer.

Improve cash flow

For product-based businesses, inventory represents the majority of their cash. So if you don’t analyze and plan your inventory effectively, your business is in danger.

Running out of in-demand SKUs and stagnant inventory can be disastrous. They cut into your margins. But if you have an Inventory to Sales Ratio Report, you will find your business’s lean and robust times. You also will find which products to cut out of your inventory entirely.

Increase customer satisfaction

Customers are the key to your business's survival. If you don’t have any customers, your business is dead.

Having an Inventory to Sales Report will help you offer your products with more efficiency. You respond faster to customer concerns, fulfill orders efficiently - leading to more loyal customers.

Reduce waste

Unsold inventory is a waste. If they become spoiled or lost, you need to write them off. And that hurts your business a lot. You might as well set your cash on fire.

If you have a report on inventory and sales, you will be able to monitor what you have. You can improve inventory control and reduce costs.

Get better pricing in your supply chain

Knowing which items are most profitable will help negotiate terms in your supply chain. You can improve your bottom line by getting better pricing for raw materials, finished goods, and equipment. You can prioritize the products that can produce the best business for your operations. And you save money and other resources with accurate inventory analysis.

Controlling and managing your inventory is key to your business success. Having the right amount of stock in the right place at the right time enables you to render excellent customer service. You should always strive for the right balance of inventory is always being maintained. Poor inventory management will affect profitability negatively.

Since the carrying cost of inventory is not cheap, we should aim to ensure that the products are available in stock when demand is there. Inventory control is integral to achieving sales goals and timely order fulfillment.

Inventory to Sales Formula

Want to know the inventory to sales ratio of your business? Here’s the formula:

Inventory to sales ratio = average inventory/net sales

What can you learn from the Inventory to Sales Ratio Report?

With an Inventory to Sales Report, you can monitor sales performance in relation to product volume. You find the analysis on the data about the sales of each product and the inventory you have on hand for each product. Here you can answer many questions that can lead you to decide more efficiently in your business:

1. Which product do customers buy the most?
2. Which product does not sell?
3. Is my daily sales volume trend going down or up?
4. How much stock should I keep for each product?
5. Do I have too much or too little inventory?
6. Should I continue selling this particular product?
7. What is the demand for this product?
8. Do I have supply to satisfy the demand?
9. What sales strategies work well and which are not?
10. Which aspects need improvement?
11. What business opportunities at untapped markets can be unraveled?
    
12. Analyzing Inventory to Sales Ratio Report
    

This report will give you a comprehensive look at your data. So you can dig into the numbers and find specific information about your sales, product demand, supply chain, and operations. Keeping an eye on this type of business report will ensure the perfect balance in selling your on-hand inventory. This will help you get quicker ROI with high profit and low costs.

Experts say that an inventory to sales ratio should be less than one (from ? to ¼). It means that you are selling products well and producing in-demand items on time. Here you are selling more of each item in your inventory.

An inventory to sales ratio of one or more indicates that you are not converting enough inventory to sales. So what you should do is focus on selling your current inventory first. If you still fail, you need to change your inventory purchasing and stocking habits. The objective is to spend less while optimizing your production on fast-moving items and less unsellable items. You should also make sure that your pricing strategies compensate you well for your costs while keeping customers buying.

Company executives can use the Inventory to Sales Ratio Report to make critical decisions. They can find the efficiency, or lack thereof, in their business operations. Check any trend changes by comparing historical data with real-time statistics.

Conclusion

Do you want to increase the ROI out of your business processes? Get an Inventory to Sales Ratio Report. You can get this through a sales and inventory management system. Including this in your business will help you maximize sales and increase customer satisfaction. Your business will thrive amidst adversity by understanding product sales data.

Harness the power of your data, especially with regard to inventory and successful orders. Do this with data analytics. Get reports such as the Inventory to Sales Ratio Report to shift towards demand-driven operations. You can have customized reports through our data warehousing and analytics solutions. We would organize your data, synthesize it, and create reports with relevant analysis in your business.