2020 has reached the mid-year mark and Avalara is delivering a live presentation on this year’s sales tax changes. The report takes stock of what’s taken place in the world of sales tax since the year began. This includes emerging trends, unforeseen changes, and the curveball this year threw the world with the COVID-19 pandemic. Join us for a live webinar presented on July 15 at 1 pm by the sales tax experts at Avalara on their 2020 Sales Tax Changes Midyear Update.

COVID-19

The coronavirus (COVID-19) pandemic hamstrung brick-and-mortar commerce with a tremendous shift to digital operations and eCommerce.

All the while, businesses scrambled to deliver on fulfilment obligations to customers, remain solvent, and even retool to meet the demand for specific products.

Governments addressed the issue in a number of ways, with delayed VAT filings or temporarily cut the VAT rate for industries bearing the largest impacts. For example, the United States pushed back to state and federal income tax deadlines. This provides more time for individuals and businesses to file and pay.

2 Years Beyond South Dakota v. Wayfair, Inc.

If you recall the 2018 United States Supreme Court decision in South Dakota v. Wayfair, Inc., the ruling enabled states to tax businesses that have economic activity but no physical presence in the state. Otherwise known as economic nexus. It was a big deal. It still is. At the time, only a handful of states moved on the new ruling and began charging states without physical presence sales tax.

Fast-forward to the June 2020 sales tax situation and the vast majority of states have signed on to adopt these economic nexus laws. COVID-19 has only heightened awareness among states that remain on the fence and it won’t be long before these convoluted rules apply to all 50 states.

States Need More Money

As the last six months have proven, the states are on their own in a number of social and economic areas. As the pandemic continues to send shockwaves through economies of every scale, states are sure they’ll need to supplement their coffers one way or another to remain effective in serving their residents. 2020 sales tax rules for individual states are likely to change to address the need for making up lost revenue.

Digital And Streaming Services Can Expect To Pay More

If you haven’t heard of Zoom or GoTo Meeting, chances are you’ve been living under a rock for the past six months. States are anticipated to raise taxes on these heavily utilized platforms. As a result, digital meeting and entertainment services are likely to see sales tax legislature expanded at their expense.

More Collection Requirements For Marketplace Facilitators

Marketplace facilitators like Etsy, Amazon, eBay and others, are expected to collect and remit sales tax at an increasing rate. This shouldn’t come as a surprise. Most states already have such laws governing marketplace facilitator sales tax collections on the books. Just four states remain in this situation in the entirety of the US. One is already closely eyeing the implementation of such legislation.

The Dynamic Nature of 2020 Sales Tax

Nothing is guaranteed but death and taxes. Unfortunately, sales tax rules seldom retain the same state for very long. The last six months have seen reductions or eliminations of sales tax rules for feminine hygiene products. There’s even been discussion within some regions on the elimination of sales tax for firearms. Now, groceries are a focal point for communities hardest hit by job loss and economic downturn.

You can read more in Avlara’s comprehensive report, here: 2020 sales tax changes midyear update.

About Encompass Solutions

Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers and Distributors. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.


An Encompass customer in the Industrial Heating industry recently fell victim to an opportunistic ransomware attack that had encrypted all internal system files, as well as their Epicor application files. As a result, work was unable to continue, bringing operations to a standstill. Encompass’ Managed Services (MS) were enlisted to help get things back up and running. The company requested this case study on their ransomware recovery project be posted anonymously.

Ransomware Recovery Project Background

The company’s network fell victim to a severe ransomware attack. Unfortunately, it had affected all internal systems, including backups. The attack took down the company’s systems completely in a matter of hours, forcing the company to rebuild from scratch.  Fortunately, the company was able to save its Epicor Database.

The Plan

Initially, there was no internal plan in place at this company to address the initial attack or the fallout from such an event. The results from the attack were a focused effort to get systems up and running as fast as possible as well as restore a state of operational functionality.

Objectives for the engagement with Encompass Solutions’ Managed Services team were to recover system use, rebuild what was lost, and establish backups.

A plan to instate standard operating procedures that would minimize the potential for reoccurrence and maximize the efficiency of response and ransomware recovery followed.

The Execution

The company’s staff were able to provide Encompass with the necessary documentation, in the form of a blueprint of the existing Epicor environment, to rebuild the system in a more structurally sound way than the original.

Encompass’ MS team worked with corporate IT staff to ensure backups and other security precautions were in place moving forward.

Overall, Encompass has just been a great asset to our organization. We have been through both a major Epicor upgrade and recovery process with them, and I am extremely impressed with everything they have done.  They definitely make my job easier.

– C.R., IT Manager

The Results

Encompass’ managed services team were able to work with the parent company to reestablish a stable network and functional Epicor system in less than one week.

Next Steps

Documented SOPs were put in place to routinely establish backups and test recoverability on a regular basis.

This company was pleased with Encompass’ level of service and expedient reaction to the situation. The two organizations will continue to work together on future Epicor projects and system maintenance.

About Encompass Solutions

Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers and Distributors. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes for hundreds of customers across the globe. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.


The free sales tax risk assessment is a self-serve online resource that helps companies determine where they have triggered economic nexus. Companies answer three questions and receive a PDF report that provides a map and details regarding where they have triggered sales tax obligations and which states they need to watch.

Know Where You’re On The Hook With Our Free Sales Tax Risk Assessment Tool

Get a breakdown of states where you may be obligated to collect sales tax. The free Avalara Sales Tax Risk Assessment can help you determine where your sales have created a need to register to collect and remit sales tax — and guide you on a cost-effective automation solution.

Still Need Convincing To Use This Free Sales Tax Risk Assessment Tool?

Has your company triggered economic nexus, or do you want to find out if it has? Try our tax expert partner’s free online sales tax risk assessment today – Avalara will give you your own report.

Selling into states where you’re not physically located? You might be on the hook for sales tax if you’ve sold a certain dollar amount or volume.

Give our tax expert partner Avalara some of your time, and they’ll give you a customized PDF featuring each state where your sales have likely triggered a sales tax obligation and suggestions on an automation solution with strong ROI.

Get a breakdown of states where you may be obligated to collect sales tax. The free Avalara Sales Tax Risk Assessment can help you determine where your sales have created a need to register to collect and remit sales tax — and why.

43 states tax remote sales so it’s hard for businesses with national (or international) sales to know where they’re required to register to collect tax. Avalara’s new tool provides that clarity. Check it out and let’s talk about automating that knowledge.

About Avalara

Offering end-to-end tax compliance solutions to enterprises big and small, Avalara makes automated certificate validation, storage, and management easy. Avalara’s cloud-based sales tax automation software provides accuracy for all of the 12,000+ tax jurisdictions in the United States. Avalara ensures that automating sales, tax calculation, and maintaining compliance are all possible within your existing ERP, POS, or e-commerce system.

About Encompass Solutions

Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers and Distributors. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes for hundreds of customers across the globe. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.


The article “How to Consider the “What-ifs” in Times of Uncertainty” by Wayne Slater was originally published on the Prophix blog in April, 2020. you can read the original article, Here.

The word “uncertainty” immediately invokes feelings of anxiety and fear. This is not unusual, as it’s a natural human reaction to prefer the comfort of predictability over the vagueness of uncertainty. It’s in our nature to plan our day, week, and year on the data available to us. Businesses and finance professionals are no different. When the future is uncertain, this increases the risk to businesses and anxiety escalates around how to tackle the situation quickly.

Uncertain times are just that, uncertain. They make predicting the future much harder at the precise time you need to plan for it the most. Like people, businesses need to change with the times as well. Plans are no longer set in stone and need to be revisited more than twice or thrice in a year.

The need for active forecasting based on real data is paramount to making well-informed decisions about the future. In uncertain times, it’s all about becoming agile. Think about how the United States went from one COVID-19 case in Jan. 2020 to over 140,0001 by the end of Mar. 2020. Whether your organization operates in healthcare or hospitality, your plans need to adapt quickly because new decisions need to be made. Project management has already started moving from waterfall methodologies to agile for more frequent output. Ask yourself, has this sort of innovation happened in FP&A? It’s high-time finance teams are equipped with the right tools to “shift from generating data to producing insights2” that drive superior decisions.

Get access to our short 20-minute webinar on how your business can better react to and prepare for market volatility with CPM software.

an image of the future-proof your business webinar hosted by Prophix

The World of CPM

Welcome to the world of CPM – Corporate Performance Management – a tool that transforms your finance department by making processes more efficient, agile, and automated, so that you can leverage your data to improve planning, reporting, security, workflows, and consolidations, all while reducing human error. Ultimately, CPM lets your organization be proactive, forward-thinking, and enables finance leaders to better guide the organization during uncertain times.

Agile Scenario Planning

An especially important application in these uncertain times is scenario planning (see Fig.1 for contextual and transactional environmental factors involved in scenario planning). What realities is your business facing? What happens if consumer spending falls by 25%? Or if product revenue falls by 15%? Or customers need to renegotiate payment terms? Whether sales are booming or declining, finance leaders need to go back and revisit their forecasts to assess the impact to cash flow and profitability and set correcting strategies. Having a centralized CPM tool like Prophix can make your life easier because it allows you to easily run scenarios on-the-fly.

Fig. 1: The Role of the Contextual Environment in Scenario Planning | https://sloanreview.mit.edu/article/using-scenario-planning-to-reshape-strategy/

an iamge of how to future-proof your business using contextual planning

Powerful tools let you transform your data and allow you to better model your operations, especially in regard to “what-if” scenario planning. Positioning your company for success involves tough modeling to ensure business continuity.

Some industries are experiencing tremendous growth like healthcare, pharmaceuticals, and groceries. Concurrently, there are those that are being hit hard financially such as hospitality, aviation, and retail. Cash flow planning becomes critical during uncertain times. With a robust CPM tool, you can easily model changes to your plans and move forward. It’s all about enabling you to plan smartly.

Your finance department probably spends long nights doing month-end and operational tasks. If they’re already spending 80% of their time on transactional tasks, it can be hard to shift focus to complex planning. Is your team equipped and ready to model endless scenarios in price adjustments, changes in capital spending, and fluctuating labour needs? Now, try to imagine a world where you already had a plan and solution in place to successfully steer you out of uncertainty…

Unsure how to move forward in uncertain times? Listen to the upcoming Prophix webinar on the benefits of proactive scenario planning.

Planning for Uncertainty

So, how you do you plan for uncertainty (see Fig. 2 for some tips on scenario planning)? Well, it depends on many factors, but it starts with having a tool that can effectively and centrally manage your data, so that all your users can view and interpret the same information.

To prepare for uncertainty, you need to set the baseline financial plan and the appropriate objectives/strategic goals. Next, prepare for different outcomes by involving more people in your planning process and consider best- and worst-case scenarios. CPM software lets you do this seamlessly through workflow project management capabilities.

Once your data is centralized, it’s easy to assess your performance against planned objectives. As you understand your variances, you can measure performance, visualize the future, and adapt accordingly with agility. Once everyone agrees, you can automate report distribution, buying you more time for value creation and generating insights.

Get your guide to corporate financial planning during the pandemic – watch the webinar.

Fig. 2: The DOs and DON’Ts of Scenario Planning | https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/overcoming-obstacles-to-effective-scenario-planning

an image of how to future proof your business using the do's and don'ts of scenario planning

As you can see, scenario planning is closely linked with both budgeting and forecasting. Things change, uncertainty arises, and plans evolve. In finance, scenarios act as guiding frameworks about events that may or may not take place in the future.

As finance leaders, we must proactively plan for the unknown and incorporate it into our forecasts. We must assess more frequently whether we are meeting our objectives, and if these objectives need to be changed. Scenario planning helps mitigate variances by focusing on the realities of the business. It helps finance leaders manage resources and improve decision-making by considering opportunities and risks.

In summary, the strategy is all about envisioning and implementing ideas and goals that let you compete and win in the marketplace. Don’t let old habits of the past slow down your organization and its predisposition to change. CPM tools like Prophix provide you with the technological solutions that help innovate the Office of Finance in a rapidly evolving environment to give you a competitive edge in a world of big data and increasing complexity.

Consider the “what-ifs” in Prophix’s webinar on proactive scenario planning – watch now.

Join the live discussion with Q&A to learn what CFOs around the globe can do to respond to changing conditions and ensure business continuity while improving planning and minimizing risk.

Footnotes:

1 – https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html

2 – https://images.info.deloitte.ca/Web/DeloitteManagementServicesLP/%7B161111db-4cc2-4d68-a272-96bd0a7d551a%7D_ca_en_FinanceTrends_16_3730T.PDF

About Prophix

Prophix develops innovative software that automates critical financial processes such as budgeting, planning, consolidation and reporting — improving a company’s profitability and minimising its risks. Thousands of forward-looking organisations in more than 90 countries use software from Prophix to gain increased visibility and insight into their business performance.

About Encompass Solutions

Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers and Distributors. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes for hundreds of customers across the globe. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.


The article “It’s 2020 — Should Business Owners Fear The Cloud?” was written by Epicor Software Corp. CEO Steve Murphy and published by Forbes on March 2, 2020. You can read the original article here.

The cloud. It’s a small word that packs a big punch. Defining what cloud is can cause confusion for some, while implementing it raises concerns for others.

We should consider three key factors as we continue into a new decade and business owners ask if they should fear the cloud: privacy, interoperability and cost.

But first, what is the cloud, and why are businesses migrating to this solution?

Essentially, the cloud is a delivery method for your software. It’s a network of servers that are linked together and operate as a single system. The cloud can perform a variety of functions (e.g., storing data, running applications, delivering content, etc.), and you can access it online. There are both public and private cloud options. The biggest difference with the cloud is what it doesn’t require. You don’t need any hardware or networking gear on-site – all you need is a tablet or a phone to run the software.

One of the major reasons I believe cloud adoption continues to grow is the flexibility and productivity enhancements it offers. As the CEO of a company that offers cloud platforms, I’ve found that these features are particularly attractive as business owners look to build resiliency in the face of unpredictable trade wars and other geopolitical changes. Business owners often look to business management software to provide stability. According to Goldman Sach’s 2020 review (via CNBC), 23% of IT workloads are now in public clouds.

So, should business owners fear the cloud when it comes to privacy, interoperability and cost?

Should I fear privacy in the cloud?

There is no denying privacy is a major concern when it comes to data. Data breaches continue to increase, as does the projected production of data. To keep pace, both software solutions and IT departments will have to up their game.

First, I’ll share the bad news. According to Hiscox’s 2019 Cyber Readiness Report, most businesses are unprepared for cyberthreats. In fact, in the U.S., 73% of businesses are “novices” at cyber readiness.

The good news, however, is that the public cloud has proven safer than on-premise data center environments. Specifically, Gartner found that “to date, there have been very few security breaches in the public cloud” and that “through 2020, public cloud Infrastructure as a Service (IaaS) workloads will suffer at least 60% fewer security incidents than those in traditional data centers.”

If you decide to move to the cloud due to these safety findings, you should still be mindful of cloud vulnerabilities. Take stock of what kinds of sensitive information you are putting in the cloud, and ensure you understand how the cloud provider will protect that data. The time needed to safely migrate systems and data can be lengthy, but it shouldn’t be rushed at the expense of security infrastructure. Select a provider who prioritizes security during the migration process and who has a solid reputation for getting the configuration right, and communicate with your team so that they understand the migration timeline and can manage their expectations.

Regardless of your software solution, privacy issues will continue to be a concern. One of the most important things business leaders can do is ensure they have a crisis management protocol in place if and when a breach should occur.

Should I fear cloud interoperability challenges?

I have great news on this front. There have been major strides toward interoperability. In fact, multiple systems can exchange and use information easier than ever before. This is due to a variety of reasons: Many application programming interfaces (APIs) continue to get better, and standards continue to improve, and, notably, I see tech giants such as Google, Amazon, and Microsoft Azure frequently expand the universe of applications that can easily be put in their clouds. I believe their efforts have significantly moved the needle.

While interoperability isn’t perfect, there’s a lot of upward momentum. I expect that to progress.

Should I fear the cost of the cloud?

If you’re a business owner and you aren’t sure cloud makes sense for you from a cost perspective, ask yourself if you have a good grip on how much it costs to have your own data center in your business. Do you already have the IT skills in-house to run your own system? If so, the cloud may not make sense.

However, many business owners are surprised to find that their IT operations cost them a lot more than they think and that implementing cloud solutions can save them both time and money when it comes to issues such as automatic upgrades (which keep your company current and competitive), labor and maintenance costs, or increases in workforce productivity, to name a few.

Just remember that the decision between on-premise and cloud will be unique for each business. When you’re evaluating your IT operations cost, ask yourself how scalable you need your solution to be in the future. How adept is your IT department at staying up to date with evolving technology? Will you need additional data storage, and do you have the physical space to accommodate an expansion of your on-premise data center? Do you need access to data on the go? If a natural disaster hits your business, how will you back up your data?

What it comes down to is the total current cost of your on-premise data center versus a cloud solution. For business leaders who are still on the fence about expense, make sure you evaluate your options regularly. Cloud providers will have to continue to be cost-competitive, which could work in your favor.

Bottom line: Don’t fear the cloud. It could be a safer option than on-premise data. Its interoperability continues to improve. It can be highly effective at increasing productivity. It can save you money long-term. And the cloud will likely continue to improve over time. The year 2020 may be the one for you to move forward with implementation.

About Encompass Solutions

Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers and Distributors. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes for hundreds of customers across the globe. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.


The recent Financial Service Network (FSN) survey on Planning, Budgeting and Forecasting (PBF) showed two key characteristics for those organisations that produced the most insightful finance forecasts. First, was the ability to leverage non-financial data. Second, was the application of advanced analytics. We will look at how the most successful organisations expand their vision beyond the narrow financial view of the future to produce more valuable foresight in their PBF processes.

Finance: The Home of Truth

The financial component of enterprise resource planning, whether part of a full-fledged ERP system or a mom-and-pop shop running Quickbooks, has historically been the ‘home of truth’. Finance was where everyone turned for answers, since the only quantitative test of performance and sustainability was the P&L and the balance sheet. Finance largely birthed the IT function in a bid to automate the production of some of these answers. Most famously, in the production of payroll. Despite this, finance has now lagged in technology investment for some years, being overtaken by marketing, sales and operations.

With new technology at their fingertips and an increasingly scientific approach, other functions in the business have begun to answer their own questions, collecting and analysing their own data. The numbers in marketing may still be a little hazier than in finance but marketing has begun to offer insight into things that finance cannot, or has not. Market trends and consumer behaviour tell leaders not just about what is but what might be. This forward-looking insight has often contrasted with finance’s view of the future.

The Past, Give or Take

Finance’s view of tomorrow has, by contrast, been rather singular in its source – the past. Predictions of tomorrow have been based on the evidence of the most recent year, with management’s desire for growth most often being the biggest factor steering the positivity, or otherwise, the forecast for the year ahead. Only negative macro factors have dissuaded forecasters from positivity about the bottom line and all the pressure that brings to bear on sales for revenue growth and operations for ever greater efficiency.

The figures from FSN’s report might suggest this had changed. 72% of finance leaders say their forecasting processes are now inclusive, drawing on sources from across the company but dig further into the figures and this starts to feel more like an aspiration than a reality.

78% of the senior finance executives surveyed agreed that greater use of non-financial data is the best way to improve their PBF process and outcomes. 76% recognised the importance of connecting with more stakeholders from outside of the finance function to improve the accuracy of forecasts. The need to connect with other functions and share data is clearly acknowledged.
But 74% say they are struggling to identify all relevant non-financial data sources. Why? Over 55% of respondents say that the lack of involvement of non-finance personnel is amongst the greatest barriers to forecast accuracy.

The obvious conclusion is that the connections between finance and the rest of the organisation just aren’t there.

Additional Barriers

The lack of cross-cutting relationships through the business is not the only issue blocking the better application of non-financial data for improved forecasts. A quarter of respondents say their senior managers do not appreciate the value of non-financial data. And surprisingly, 23% delegate non-financial data tasks to more junior staff despite 43% of respondents ranking it in their top 3 sources of ‘most insightful data’.

Insightful it may be but there remain concerns about the quality of non-financial data when compared to the sources with which finance professionals are more familiar. 41% of CFOs are concerned about its integrity and believe it is less reliable than financial sources. This may well be true but these issues can be addressed, with appropriate weighting and analysis. The potential value of the data is clear, to ignore it would be nonsensical.

Taking Steps

So, how do finance leaders address these issues in order to improve insight into their planning, budgeting and forecasting?

Relationships across the business rely on reciprocation and communication, not just shared goals. Finance has to be able to bring value to the other functions of the business if it is going to extract value back.

That value comes from the insight finance can bring. Most functions in the business are seeking better analysis of their situation and environment, and finance should have the skills to deliver that.

That comes with a time penalty of course but increasing automation of the base functions of finance should be releasing resources. This is a great way to apply the released resources to improve results.

Relationships will be hard to build without the soft skills of communication, and this is another area where finance has historically fallen down. In our interactions with younger members of finance teams, we consistently find a lack of training on offer in anything beyond technical skills. This frustrates the ambitious and leads them to move on. Training then offers a two-fold benefit to the business: better collaboration and a greater chance of retention.

This isn’t to say technical skills aren’t important. Finance leaders need to be constantly up-skilling their teams in planning and analysis, and equipping them with the right tools to apply their learning. Then, they can efficiently integrate non-financial data into their models, improving forecasts and returning value to the other business functions.

As FSN says in its own report, “Mastering non-financial data is the key to being able to forecast accurately and further into the future.” The only way to do this is to enhance the relationships that finance holds across the organisation, by investing in the skills of its people.

For more information on ERP and the future of financial systems, read the FSN report on the topic – HERE

About Prophix

Prophix develops innovative software that automates critical financial processes such as budgeting, planning, consolidation and reporting — improving a company’s profitability and minimising its risks. Thousands of forward-looking organisations in more than 90 countries use software from Prophix to gain increased visibility and insight into their business performance.

About Encompass Solutions

Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers and Distributors. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes for hundreds of customers across the globe. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.


Businesses of every size contend with keeping the availability of materials, components, products in sync with their rate of production and customer demand. Finding the balance between these factors is, at a high level, the core concept of inventory management.

What Is Inventory Management?

As a business digs deeper into the specifics of inventory management, it will refine its goals. This includes all the additional details that make the process more efficient. Suffice to say, good inventory management goes beyond the weight, dimensions, quantity, and location of items.

At a foundational level, your business will need a system of categorization to manage inventory. This also requires a means of interacting with this system when adding, removing, and identifying items.

Your system may require software and interactive technologies. These technologies can include computers, barcoding hardware, and scanners.

Knowing what you have in inventory and where is only one part of the equation. Forecasting demand to inform a business of when to replenish stock or when to buy more materials to manufacture those products is just as essential.

By ensuring that warehouse space is used efficiently and in sync with the rate of sales and replenishment, the cost associated with goods held in inventory is kept to a minimum.

In a broader sense, Inventory management is the component of your business’ supply chain that keeps material flowing into and out of your facility.

This is kept in accordance with production processes and customer demand.

Suppliers may experience fluctuations in the ability to fulfill PO’s and global events may shake up availabilities across the board. However, you can keep your own house in order with inventory management best practices.

For example, keeping a detailed record of products as they enter and leave your warehouse provides visibility your business needs. This ensures you are able to deliver on customers and supply chain partners’ requirements at any given time.

Businesses of every size use inventory management principles to manage their flow of goods. However, there is no defined set of guidelines that all businesses can look to for the answers.

The best inventory management strategies will change from business to business, but generally accepted best practices can be applied in almost every case.

Identifying the right set of guidelines for your mode of operation will ensure you are able to deliver the right goods in the right quantities to your customers at the right place and time.

The Difference Between Inventory Management And Inventory Control

While these terms may seem the same at face value, they are generally not considered interchangeable.

A strong inventory management system ensures a business can source, store, and sell materials or finished goods in such a way that yields a consistent and dependable profit for the business overall. Good inventory management is a sustainable practice.

Inventory management follows a structure of thought as a business principal. It is an overarching set of concepts that address a larger business model.

Inventory Control is housed, pun-intended, within the larger concept of inventory management. Inventory control is focused on maintaining visibility and understanding of the materials and their flow. Namely, where and how much inventory can be found on-hand and readily accessed in a retail location, stockroom or warehouse.

Why Inventory Management Is Important

Global supply chains are complex and in a state of constant ebb and flow.

Manufacturing processes that utilize raw materials and components are also changing continually according to customer demand, specification, and regulatory requirements.

In short, what is available today may not be available tomorrow. However, there are usually indicators of when a supply shortage may be looming or new regulations will be coming into effect.

Keeping up with these constant changes is more than simply difficult, it’s outright unnerving and even chaotic at times. Being stuck with an abundance of stock that can’t be used, spoils, or becomes obsolete can cost a considerable amount of capital, running a business well into the red. This is where the balancing act of inventory management becomes so critical.

The costs of carrying goods can be considerable. For this reason, many organizations seek to refine and optimize their methods for ensuring they have just enough material on hand to deliver on anticipated production levels or sales.

Streamlining inventory management will keep inventory levels low, which keeps costs sunk into stock on-hand to a minimum. Furthermore, lower stock levels will ensure less space is required to match material requirements to production levels. With less space required, facilities can be kept to a more manageable size and minimize warehouse leasing costs.

How You Can Implement Best Practices

Fortunately, for many decades, businesses have been refining how they bring stability to the unpredictable world of global supply chains, manufacturing processes, and inventory management.

As part of those efforts, two major philosophies of inventory management have emerged as the most widely accepted and utilized: Just-In-Time (JIT) and Material Requirements Planning (MRP). Both instances have their benefits and drawbacks. We go into more detail in dedicated articles on JIT and MRP inventory management strategies.

Technology And Software

Beyond JIT and MRP inventory management, there are a number of technologies and software that make the process of managing inventory easier on businesses, staff, supply chains, and customers.

ERP software is one such technology that delivers all the critical data needed to inform demand forecasting and purchasing, whether a business is based in manufacturing or wholesale and distribution.

Inventory management data housed within the ERP system is accessed and reported digitally, while also easily sharable for key stakeholders and managers to use in their decision-making processes.

About Encompass Solutions

Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes for hundreds of customers across the globe. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.


Cycle Counting is an inventory management concept that focuses on auditing a warehouse’s inventory.

Cycle counting Objectives

The objective of a cycle count is to track and document inventory levels. While most warehouses will carry out a cycle count at least once a year, it is recommended to complete one more often. This process and its associated procedures ensure warehouse and production teams are working with accurate inventory data. Performing accurate cycle counts often will help maintain the accuracy of your data and the efficiency of your inventory management.

Cycle Counting Versus Full Physical Inventory

Cycle counting is a manual process and can be carried out at any time on specific groups of items and helps refine procedures for tracking and inventory management. The process is designed to be carried out without interrupting a facility’s operation.

Cycle counting benefits include:

  • Provides high levels of inventory accuracy
  • More accurate financial reporting
  • Considered less disruptive to operations when compared to a full physical inventory
  • Can focus on subsets of inventory and items based on specific criteria
  • A reduction in errors associated with bad data
  • Higher levels of customer satisfaction
  • Fewer inventory write-offs
  • Reduced losses due to inventory shrinkage

Cycle counting disadvantages:

  • Highly dependent on buy-in from company leadership down to warehouse staff
  • The process needs to be carried out at regular intervals

A full physical inventory is a complete physical count of a business’ entire inventory, most often carried out on an annual basis. The process is generally manual, time-intensive, and requires shipping and receiving operations to be shut down for the duration of the process. As a result, the full physical inventory process can be disruptive.

To minimize the disruption, businesses often attempt to schedule these procedures during a slow period, when inventory levels are low.

Full physical inventory benefits include:

  • Improved inventory accuracy
  • More accurate accounting records
  • Tax burden relief attributed to the record of losses
  • Control over inventory shrinkage

Full physical inventory disadvantages:

  • Shipping and receiving operations are ceased during the process
  • Time-consuming
  • Inconvenient for customers and supply chain partners
  • An expensive, non-revenue-generating activity
  • A high tendency for human error, resulting in bad data

Many companies complete annual physical inventories as a way of controlling their understanding of what’s in stock at any given time. However, performing a once a year activity to give that visibility leaves gaps.

For this reason, cycle counting is a preferred method of inventory management for businesses of every size. It is not uncommon for businesses to employ both a full physical inventory annually alongside incremental cycle counting throughout the year.

How To Complete A Cycle Count

Cycle counting garners appeal by offering an ongoing and easily achieved approach to inventory management. It is in maintaining the discipline of cycle counting that many organizations find issues.

It should be noted that every organization is different and a cycle count will be adjusted to fit each business’ method of operation. If your organization is interested in implementing a cycle counting program, it would be a good idea to consult a warehouse and inventory management professional. This way, you can avoid costly mistakes associated with trial and error.

Cycle counting involves a physical count of some sub-section of inventory located in a warehouse or other storage facility. It is recommended to complete a cycle count at least once a quarter.

These small cycle counts reveal discrepancies in data that can be logged and rectified within enterprise systems for accurate inventory management.

Here’s a general outline for what’s involved in a cycle count:

  1. Update your inventory records before carrying out a cycle count. You need a baseline from which to work.
  2. Determine the scope of your count. For example, a small cycle count will cover X amount of SKUs, while a larger count will cover XXX amount of SKUs. You could also choose to count items over a designated time period, such as the fiscal year.
  3. Decide which inventory to count first and item subsets to follow. Most businesses generally count their “A”-list products first. That is, the 20% of your inventory that makes up 80% of your inventory value.
  4. Determine the tools and equipment required to perform the cycle count. For example, if your inventory is barcoded, do you have handheld scanners available? If goods can’t be physically counted or handled, do you have a scale to weigh them?
  5. Decide who will perform the cycle count.
  6. Carry out the cycle count based on the details outlined in preparation.
  7. Review discrepancies between the cycle count results and warehouse records.
  8. Make the appropriate adjustments for incorrect data based on your baseline inventory record.

Cycle Counting Workshops

Encompass Solutions can train your staff to carry out Cycle Counts that Count through an educational workshop series led by our experienced inventory and warehouse management consultants.

Learn more about our Cycle Counting workshops HERE or contact us using the link below to speak with a representative.

About Encompass Solutions

Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers and Distributors. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes for hundreds of customers across the globe. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of Industry.