Inventory management is often one of the key ingredients to growing a successful business and businesses typically have a lot of cash tied up in stock – often resulting in cash flow challenges.
If you can reduce inventory levels, you will increase the amount of cash available to run the business. However, it is important to have just the right level of stock to meet customer demands. If you have too much your money is ‘sitting on the shelves’ but having too little could lose you sales/profits.
When buying stock, consider the following:
- stock shelf life
- the ideal amount to order for each item
- your minimum acceptable stock levels
- when you should order stock, based on time or quantity
- how long you need to allow for reordered stock to arrive
- if your stock needs are predictable, whether you can set a fixed quantity or interval for reordering stock
- what terms of payment you can negotiate with your suppliers
- what payment terms you set to manage debtors.
Managing stock efficiently will take time and effort initially, but the benefits to your business will see from these changes will be dramatic and long term.
