Effectively managing inventory

Effectively managing inventory

Without an effective inventory management system, businesses can tie up a lot of capital in stock often resulting in cash flow problems.

Besides cash flow improvement, effective inventory management can help businesses process orders faster, manage suppliers better and reduce slow moving stock. Here are some tips for establishing a well-functioning inventory management system:

Assign responsibility: Assigning the responsibility of inventory management to a staff member will ensure that someone has a clear overview of your stock and can supply quick answers about the inventory. The inventory manager will be responsible for managing all items on hand and in transit, and can establish a stock control policy.

Understanding your stock: A successful inventory plan accounts for both working stock and safety stock. Working stock is the stock which supports day-to-day operations while safety stock is used for unexpected events such as a high surge in demand or delays in replenishment. Ultimately, your inventory system will need to be prepared for both types of stock.

When forecasting your inventory, factor in seasonal spikes in demand and previous year’s sales. A inventory plan needs to incorporate your marketing, e-commerce and merchandising departments to accurately forecast demand. Look at sales records of individual items and update stock records to move slow moving stock immediately.

Use multiple suppliers: Using more than one vendor can help your business in times of increased demand or if you have a high-selling item that is difficult to keep in stock. By having multiple suppliers you can avoid long-lead times – keeping your customers satisfied.


If you believe the matters discussed above are relevant to your business, please contact Darren Smith of our office to discuss further.

Darren is a Chartered Accountant with extensive experience, including working in the big 4 and medium sized firms before becoming a partner of a city based firm in 2000.

He has gained much experience and has extensive knowledge in providing business and taxation advice, superannuation planning, negotiation of sales and acquisitions of businesses and property development. His client base covers a wide range of industry groups.

Darren works with business owners to grow their businesses and create personal wealth within and outside of their business.

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