Why Is Inventory Important for a Business?

I‘m always on the lookout for articles with the potential to positively change a business. What’s your take on the following points I came across recently?

Inventory is a current asset on your company’s balance sheet. More important, it is a major part of your ongoing business operations. For manufacturers, inventory includes raw materials used to make and assemble products. For resellers, it includes products you acquire to resell to customers. In either case, you need inventory to earn revenue.

Revenue and Profits

As a product seller, inventory is the driving force behind your ability to generate revenue and profits. Revenue is the money you collect at the time you sell inventory. Profit equals your final income after you subtract your variable costs. This means the ability to get inventory at the lowest cost possible and sell it at the highest price is key to a successful, profitable operation.

Management

Managing your inventory in a cost-efficient way helps you optimize your profits. This begins with negotiating the lowest costs with your suppliers. Buying in volume or committing to suppliers in long-term relationships can help with this. Managing inventory once you have it is vital as well. If you order too much inventory, you have to pay more money for employees to organize it and manage it. You have more expenses for storage areas where you hold it. You also risk waste on expired or rotted items. Having too little inventory can lead to stock-outs, which is bad for customer service.

I’d be really interested to know your opinion. Check out the full article here and then I’d be happy to discuss with you by phone (0429) 011-071 or email [email protected].

To your success,

Ian