Six steps to managing cash flow: Managing stock inventory


Stock management is a complex task. You must have the correct amount of the right lines available to be able to meet demand, but buy in too much and you are tying up money that could be used in another area of the company. Many employ a financial outsourcing service so that they can be confident they have sufficient stock without tying up cash.

Investing in stock

Stock management should be done on a regular basis, so that you can see exactly what you have on hand, the number of days it has been held for and which lines need to be replenished. When your stock inventory is closely managed, it will benefit your cash flow. Spend some time each week going through the stock inventory, just as you would with your business bank account. This is especially useful when you have seasonal lines, so that you don’t have to order too much at the start of the season.

Average holding time

Depending on the type of business you have, you will expect to hold some stock for a specified number of days before it is sold. Perishable goods will obviously be expected to be sold within a few days before you reorder. Make a note of how long each item is held for before it is sold, so that you have the average number of days.

Simplifying stock management

Keep stock management as simple as possible. Rather than trying to hold everything that people may want, stick to a smaller range of good-quality items. This is especially applicable to consumables that have a short shelf life, as you have a higher risk of having to dispose of the item, losing money.

Use accounting software or outsource to a professional so that you can keep a close eye on what stock you have on hand, what you need to order, and when it will be required. Contact us for more information.