As a small business owner, a part of your business operations that must remain 100 percent is your inventory. Often, how much you have in store and the numbers on the ledger do not add up leading you to wonder where all those hanging numbers and evidently, actual products sneaked off to while you were not looking.
Whether you realize it or not, inventory fraud and theft is a big deal for a small to medium-sized business owner. If left unchecked, inventory fraud can make or break a small business. Here is where an inventory management system comes in to help protect your business.
We have put together a helpful guide on the top strategies you need to implement as an SME to prevent fraud with inventory management.
What Is Smart Inventory Management
Smart inventory management at the core utilizes an inventory management system to keep track of all goods kept in stock. Why spend hours trying to match the books and records when you can have it done at record time all from a single dashboard? With smart inventory management, you replace handwritten ledgers and spreadsheets with a smart system stored with your products and transaction records, all in one centralized database.
You can do more with smart inventory management that gives you real-time view of your inventory down to individual attributes like size, color, batch numbers, and purchase orders across multiple business locations from a single dashboard.
Common Inventory Management Challenges Faced By SMEs in Nigeria
Managing your inventory as a small business in Nigeria presents unique challenges that can disrupt the entire supply chain of your business operations, increase the risk of inaccuracies, and cash flow volatility. A prevalent example is the “backyard sales” where an employee takes out goods from the store to sell outside of the store for a personalized profit. These goods taken through the back door are in such small amounts that make them negligible on paper.
Difficult economic conditions also may tempt staff to also accept backdoor incentives from local suppliers in exchange for favoritism. Without proper tracking when goods come into the inventory and when they leave, contractors can claim fully loaded trucks and pocket change from incomplete loads. With the climbing inflation, this translates to a major loss for the business. One with a small to medium-sized business just can’t afford.
Unstable power supply can further complicate manual recordkeeping especially where excel sheets are in use. Paper records can suffer major inaccuracy during stocktaking season where accountants might struggle with extensive records and accounts leading to cases of oversight. Advanced inventory tools can help level the playing field against such fraudulent behaviors.
Benefits Of An Inventory System To SMEs
The number one key benefit of an inventory management system is that it helps automate manual tasks and comes with analytical tools like sales reports that can give you a quick overview on the current state of your inventory. Here are some of the other benefits of utilizing an inventory management system as an SME.
It’s no wonder nine out of ten SMEs now utilize such technology according to a World Bank report. Are you ready to upgrade your operations too? Keep reading to learn how these digital helpers specifically foil fraud.
Increased Accuracy
With a smart inventory management system, you reduce the risk of inaccuracies which are largely due to the human error factor. When properly implemented, it gives a clear advantage over disorganized paper trails and spreadsheets. With automated cycle counts, you have less room for manual mistakes.
Accountability
In a standard inventory management system, every transaction is logged down to an employee, date and store location. This means if something suspicious is going on with your inventory, you can take a quick look at your records and track it down to the product and the employee. By removing anonymity, you can drastically reduce inventory fraud and theft in your business.
Real-Time Visibility and Control
An inventory management system lets you view the state of your inventory at any time and from anywhere in the world. You get a single view of all goods moved making discrepancies very easy to spot. With additional features like limited user permissions and strategic allocation helps prevent overstocking or shorting of any outlet.
Forensic Level Tracking
Detailed transaction history, sales reports and timely summaries help with forensic-level investigations when discrepancies occur with your inventory. Finding what went wrong, where it went wrong and who is responsible is much easier and simpler. Automatic reorders also eliminate the human temptation that disrupts inventories.
An inventory management system brings structure, organization, analytics features and much more to help SMEs vulnerable to inventory fraud tighten their defenses and reduce losses.
Five Strategies To Prevent Fraud With Smart Inventory Management
Strategy #1: Track Inventory Levels and Movement
One of the most powerful tools an inventory management system provides is real-time tracking of stock levels across all locations. With digitalized tracking in place, you replace human errors with accurate records of just how much you have in store. With every transaction recorded, you can update your records by simply refreshing your dashboard. Alerts can also be automated to warn you of potentially risky situations like approaching minimum stock points early.
This reduces inventory theft as would-be thieves can no longer sneak missing items under the radar. Whatever issues, misunderstandings or issues can easily be resolved with digital records.
Strategy #2: Control Access and Permissions
Not every employee should have access to the inventory and you can control who goes in or alters your inventory with a smart inventory management system. Grant approved level of access appropriate for each employee’s specific duties to reduce inventory theft. For example, cashiers only need permission to scan items and view balances, not change pricing. Managers can view reports but not delete sale records. Admin roles handle supplier and pricing adjustments with custom logins.
Now you can limit roles, monitor logins, and require secondary approval on sensitive tasks.
Strategy #3: Enable Alerts for Exceptions
Beyond just tracking inventory levels, smart inventory management systems can identify and flag discrepancies or suspicious patterns in real time through automated alerts. Employees guilty of inventory theft always leave a trail or pattern that cannot be readily tracked on piles of paperwork. With a centralized dashboard and trigger notifications, you can flag suspicious activities and potential risks at a glance.
Strategy #4: Leverage Inventory Auditing Tools
A good robust inventory system comes with well-designed templates that allow you to compare current outcomes to past trends, flagging variances that seem suspicious or unexplained. For example, one may compare monthly sales by department over several years to identify unexpected dips or spikes.
With pre-set controls on audit expiration dates, you can catch hoarding before your product goes to waste. Manually auditing your inventory is labor-intensive, time-consuming and prone to errors. With smart inventory management, you can eliminate all that and get your audit done in minutes.
Strategy #5: Enable Approvals for Sensitive Tasks
SMEs have tasks that are in the “sensitive” category which gives you additional control over your inventory. For example, a clothing retailer or boutique can prevent staff from marking down aged stock to purchase for themselves before clearance sales. An inventory management system will demand manager confirmation for any price adjustments over 20% to flag outliers.
Requiring approvals prevents single employees from fully concealing the diversion of goods, damaged merchandise write-offs, or supplier variations without oversight. No one acts alone, reducing individual risk and temptation.
The Nigerian economy already makes day to day running for a small to medium-sized enterprise a major challenge. The last thing your business needs is running at a loss due to product theft and inventory fraud. With a smart inventory management system, you can secure your investments with proper inventory technology that reduces human error, prevents fraud and protects your business, positioning you for long-term sustainability.
Need an inventory management system to manage your multi-store business in Nigeria? LumiBusiness helps businesses like yours across diverse verticals to manage their operations and to scale.