4 Benefits of Syncing Your Inventory and Accounting Software

An inventory software solution helps your clients track all their expenditures (sales, profits, losses). But although the inventory management software is useful, it might not serve them a great deal if it is not integrated with back-end systems. Back-end systems, like accounting software, coupled with inventory management software, provide you with detailed information about inventory assets. Not only will you have ‘sight’ of what inventory your clients have, but you’ll also have detailed reports of how much it is worth, the number of purchased items, and the profit margins. Seamless integrations between inventory management systems and your accounting software will help you optimize the inventory accounting process for your clients. Before we dive into details on the benefits of integrating these systems, it's important to define inventory accounting.

What is Inventory Accounting?

Inventory accounting is the methods and systems used by businesses to track and manage their inventory, which consists of goods and materials held for sale and raw materials used in production. Proper inventory accounting enables businesses to accurately determine and track the value of their inventory and is essential for proper inventory management. This allows businesses to make informed financial decisions based on the full picture of inventory and cost of goods sold (COGS).

Now that we’ve defined inventory accounting, here are the benefits of integrating your inventory management software and accounting systems.

1. Easy reconciliation of data

As an accounting professional, you know how important data is. In fact, you may have spent significant money in securing that data. This is because that data can be used to benefit or destroy a company. This is why most “big” companies are hiring professionals to come up with a good privacy policy plan and whole security teams to protect their data, while many smaller companies are outsourcing security to managed security service providers (MSSPs).

Accounting and inventory management software provides you with the same high-valued data and, when you partner with the right vendor, top-end data security. The kind of data that will help you determine:

• Where your client's company will be in the next 5 years.
• What product/services your clients need to do away with, and what they should have.
• What costs of production should be reduced.

Also, the data collected from inventory accounting software will help provide accurate financial reports to your clients. A recent study by Label Insight showed that 94% of consumers are likely to be loyal to a transparent brand.

2. Increased profit margins

Every business owner will tell you that it is quite difficult to manage labor. In fact, at times, it is quite expensive. But doing away with labor is not realistic. There’s no production without the labor input.

But is there a way to minimize labor costs yet maintain or even improve quality?

This is where integrated accounting and inventory management software comes in.

Not only does it help you get accurate data, but also reduces labor costs. Once you have integrated the system, you will just need a couple of people familiar with the software working on it. Thus increasing profit margins.

3. Improved communication with suppliers

Apart from customers, your clients can’t do without supply chain partners. In fact, they are the people who provide them with the raw materials/products/services they use to create their products. Thus, they should have clear sight of your client's inventory levels.

But it is quite hard to do it manually. Not only is it time-consuming, but also costly. This is because you will have to hire professionals to analyze data and provide them with real-time information.

Thus, the easiest way is to have a system that integrates your company with all other operations. Accounting and inventory management software that provides real-time financial information does just that.

4. It facilitates real-time data

The business world is changing rapidly. Every year, there’s some pretty interesting innovation that comes to light. However, an innovation is only as useful as its function. If it does not reduce costs or increase profit margins in any way, it is not helpful. With accounting software and inventory management software working together, you are assured of real-time data that will have an impact on your client's business. Not only does it help increase their profit margins, but provides you with accurate reports useful for forecasting.

Choosing the right Inventory Management Software for your accounting system

Choosing the right inventory management system to integrate with your client's accounting software doesn’t have to be hard. First, does it seamlessly integrate with your client's accounting software, like QuickBooks or Xero? If not, this isn’t something that should be built on the fly. Next, does the inventory management software meet your client's non-accounting needs? Consider if they need warehouse management functionality. Connections to e-commerce platforms like Amazon and Shopping Carts like Shopify are also crucial for many businesses. There are also more use case-specific needs that inventory management software can also provide, like point of sale (POS) or business-to-business (B2B) portals. Taking these considerations into account will guide you toward an inventory management system that not only dovetails with your client's accounting software but also broadens your operational horizon, paving the way for streamlined processes and insightful financial analysis.