Your Inventory is Valuable – Manage it Properly!

Depending on the type of business that you own, whether it is a store, hotel, restaurant, etc…most likely inventory is an important part of your business. Although, as important as it should be unfortunately many business owners don’t dedicate enough time or effort to proper management.

In our experience we have come across many who are unfortunately interested more in the end result than implementing important business practices that in the long run will save them money.

So, the question is, how well do you manage your inventory? In this article we will discuss a few important points to keep in mind that highlight the importance that should be given to proper inventory management.

Detect and Prevent Theft    

Unlike cash, inventory can’t be put into a bank account or locked away in a safe. Why? Well, the simple fact is that your inventory is made up of goods or materials, and even though on your financial statements they are reflected as a monetary value, no bank would accept that kind of deposit.

Also, most likely, it is necessary that your employees have a certain ease of access to what is on inventory, because they may have to continue processing the raw materials to produce the final product that the client will/has purchased.

This represents an inherent risk that can result in theft of inventoried items. It isn’t unheard of either that this type of theft can occur again and again, sometimes without management finding out for a considerable period of time.

So, what can be done? To implement proper inventory management means that as the owner/manager you’ll be able to measure and compare the trends that occur in your sales and the effect that this has on inventory at hand. When there are apparent discrepancies that can’t be reconciled, that is an alarm to notify you that there may be a problem.

When this is done it becomes much easier to detect and even prevent theft of inventoried items.

Inventory Cycle

Inventory, when compared to many other common assets – inventory – is many times the least valuable. Why? The answer is because inventory are sales waiting to be made. Now this can represent a problem, because if we’re not careful and don’t properly manage inventory the inventory cycle can be extending much more than what it should.

What is an inventory cycle? Inventory cycle refers to the number of days it takes to replenish inventory. This an important number to know, because it is very easy to overstock your inventory and this unnecessarily ties up cash that can be used for other more important things.

The idea is to manage your inventory cycle well so that you’re neither over nor under stocked and that your product is sold within a reasonable amount of time. This is ESPECIALLY important for businesses such as restaurants, because their inventory usually has a considerable amount of perishables.

Efficient Sales Process

Have you ever gone to a store or purchased an item for a provider only to find out that the item you wanted wasn’t in stock? You may have already even paid for the item only to have the shopkeeper return to say that the item is currently unavailable.

It is not only embarrassing when you can’t make a sale because of an understocked inventory, but it also most likely means that the client or customer won’t return to you for future business. If you want your business to be successful proper inventory management is so important to make sure that client orders can be fulfilled on time, every time.


If you haven’t already, try putting into practice a few of these aforementioned tips, or at the least keep them in mind in the upcoming months. Keep track of your inventory and make sure that your accounting is accurate enough to assist you in having this information at hand.


Since 1995 we have provided accounting and tax services to our clients. If you would like assistance in any of these areas or would like us to help you grow your business, then feel free to contact us HERE, no obligations.

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