One of the challenges small businesses in the supply chain face is ensuring they’re able to make inventory payments on time. This isn’t just vital for the continued solvency of the company, but responsible actions here bolster trusting relationships between supply partners, which can underpin effective growth strategies.
Therefore, it’s important to establish techniques and tools that support effective business operations. One of the most prevalent at the moment is the internet of things (IoT). This refers to a connected ecosystem of devices and software that can improve efficiency, boost efficacy, and empower companies to make informed decisions.
We’re going to take a look at how IoT can help small businesses manage their inventory payments.
Mitigating Wastage
Managing inventory payments effectively as a small business often comes down to minimizing overstock. That’s why so many young and smaller enterprises take a just-in-time approach. While this can sometimes prevent companies from being more agile in responding to demand, it can help to keep inventory payments more closely connected to the company’s revenue.
In some instances, it’s helpful to redistribute inventory to ensure the business is operating at peak efficiency. Segmenting stock into relevant spaces in a way designed to reduce overstocking potential requires significant organization and planning. Your company must commit to space assessments and inventory examinations, among others. This is where IoT can make a significant impact on your small business’ ability to stay operationally and financially on track.
Sensors in warehouses can provide real-time information on the current volume and condition of inventory items. Not to mention that scanning devices throughout the warehouse can track the journey across the premises. When combined with analytic software, the data can provide your business with suggestions on space usage optimization. It can also contribute to accurate predictions for inventory needs. This means that managers make more responsible decisions about storage and ordering. They can also identify prevalent sources of inventory losses and ultimately enable more efficient payments to suppliers.
Enabling Automation
One of the most important ways IoT is currently aiding inventory payments is through enabling automation. After all, small supply chain businesses are often subject to tight time and staff resources. There are a lot of tasks that need to be completed and, in some cases, this can lead to delays in payments and processing. A range of smart automated processes reduces the need for staff to attend to repeatable tasks.
Particularly for businesses dealing with fast-moving consumer goods (FMCGs), smart radio-frequency identification (RFID) tags are an invaluable component of automation. When affixed to each item in the warehouse, software can automatically and accurately track incoming and outgoing items. This then allows the software to independently adjust spreadsheets, update bookkeeping, and reorder items. This ensures consistent administration that maximizes revenue for paying invoices while requiring minimal human intervention.
Increasingly, supply chain IoT is being combined with fintech to automate the accounting process for small businesses, too. Accounting software can be linked to devices in the business’ inventory ecosystem to automate data entry and reconciliation procedures. Algorithms can utilize data analytics processes to produce invoices to clients, produce reports for accountants, and even directly pay suppliers.
Acting Practically
There are clear advantages to utilizing IoT for making inventory payments on time and with greater accuracy. However, the logic of use is not what tends to hold back many small businesses. Often, the primary challenge is preparing or obtaining financing to fund the upgrades required.
One option is to structure part of your business as a holding company. This can be a practical way to reduce some tax obligations that you can redistribute to investing in IoT devices. It’s also a good way to utilize this equipment as an asset kept by the holding company and rented out to various supply chain businesses, which reduces the operating costs for each enterprise.
It’s worth promoting your intentions for IoT to both potential investors and supply partners. By demonstrating that you’re using tools that improve efficiency and, therefore, profitability you may be more successful in gaining funding. Indeed, showing how your plans for utilizing IoT to ensure inventory suppliers get paid can be instrumental in their being open to expanding lines of credit so you can grow your business.
Conclusion
IoT can play a key role in helping small businesses navigate their inventory payment obligations. This includes tools that help to optimize inventory management in ways that enable your company to keep on top of good payment practices. IoT’s ability to power greater automation also maximizes the efficiency and accuracy of inventory holding and accounting tasks. While IoT may require some investment, practical steps like adjusting company structure and usage presentations can help your business and your suppliers can make the most of this technology.
