Inventory Management for the profitability of companies / Nic 2-IFRS for SMEs 13
Over the years there are changes that directly and indirectly influence business activity. Globalization, new technologies, demographic movements, the emergence of new markets and various alliances, have forced companies to adapt very quickly to survive, in the same way, they have to be flexible, creative and proactive to continue distinguishing itself, and in this way, retaining its market share, generating new business, strategies and opportunities.
For all this, it is necessary to develop transformation processes that lead to profitability, since, as it increases, it creates competitiveness, which generates quality products and services. For this reason, the company must be inserted in the innovative managerial approaches that allow to direct it with a new mentality, in function of the efficiency and efficiency with which the management executes its tasks; leaving aside traditional practices rooted in the product, without taking into account the processes.
Due to this, the importance of inventory management, since it allows you to clearly know operations and figures that have the purpose of diminishing the possibilities that the organization does not have at a certain moment the existence of products for the availability of the consumers. . It is appropriate to mention that inventories are the assets required for the purpose of any company and that their adaptability to all activities carried out and resources managed within companies is required, since, the accurate knowledge of the materials with which It is counted in stock and the use of a comprehensive control of the income and movement of the same leads to the commercial organizations to have better results, as well as to have a better vision and of course to monitor their profitability.
However, companies must consider that profitability is not only about making the most of the goods or resources, but also making an adequate use and management of their stock of merchandise, in order to achieve an ever greater profitability, but in a effective and efficient. Companies within the commercial or industrial sector must safeguard their inventories, adapting them to what is established in standards, policies, actions and procedures, since these are important factors that allow increasing the profitability of the business, and thus, maintain an adequate market.
However, inventory management involves the development of specific and strategic plans that favor the organization in terms of the objectives proposed by senior management through a set of operations derived by the divisions of the company. It is necessary that every company constantly evaluate the distribution of its capital, that is, that the investment made in merchandise does not exceed the income of cash that is possessed; There must be a precise management of each asset that is held within the companies, benefiting for a liquidity and therefore desired profitability, fulfilling each of the objectives set as an organization.
Therefore, it is necessary to use an inventory system in line with the evolution that all companies are currently experiencing; always remembering that if you have the continuous or permanent inventory system you will have at the moment you want the information regarding the amount of merchandise that is held in the stock of the company, on the contrary, if you consider a periodic system only The exact amount of the inventory will be known after a physical count on an exact date and with the required valuation. It should be noted that the periodic inventory system is only recommended in small or medium-sized companies (SMEs) and the continuous system is recommended to companies that include larger activities (large companies).
However, to achieve the desired by all managers of companies to profitability based on efficiency and effectiveness, should be reasoned in the application of the methods of valuation of inventories contemplated in Accounting Standards (NIC 2) application for large companies and the International Financial Information Standard (IFRS) for Small and Medium-sized Entities (SMEs) (section 13), which contemplate how to calculate the cost of the merchandise in stock of companies (weighted average, first enter first on leaving (PEPS)); because, these methods of valuation or recognition of cost, allows any company to recognize the cost of sale at the time the activity happens (in the case of the FIFO method) since, it is presumed that the item that was sold is calculated the cost of more seniority; but if this were not the case, it should be assumed that a weighted average method is being applied through the total sum of the costs and dividing these by the total amount.
Due to this, the precise application of the inventory valuation system assumed by every company will determine the profitability of the same, since, this asset is considered one of the most effective investments made by companies, then, an incorrect management of them , whether the excess or insufficiency in the investment, can bring consequences for the financial and operational stability of the organization.
Author @keniacarolina