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How to Manage Inventory to Increase Your Bottom Line

The best way to manage inventory is to know your customer. That is to say, your strategy should be to carry just enough inventory to meet customer demand.

Understand How Inventory Affects Cash Flowanimated image of man standing atop big, rolling ball while holding a long stick with both hands to balance managing inventory

Inventory levels directly affect cash flow. That’s why it’s a good idea to understand and closely monitor your ecommerce inventory strategy.

By doing so, you might even be able to free up some much-needed cash.

For example, keeping lower inventory levels suggest a store’s quick sales and inventory turnaround times. The result is in an increase in net profit.

“Improving inventory turns in your small business can help improve cash flow, working capital and put more money in your pocket as a small-business owner,” notes Dick Jones, Founder and President of Jones Simply Sales.

Conversely, higher inventory levels result in carrying costs that tie up cash – cash that could otherwise be used for advertising or operating expenses.

Create a Simple Plan to Manage Inventory Levels

At its essence, a basic inventory management plan allows you to seamlessly manage inventory manually or using an app. Here’s how:

Set up a separate file for each item you sell. This will allow you to track quantities, know if you have an item in stock, and when it’s time to reorder.

And you will avoid ever being out of stock on an item again. Plus, you’ll be able to easily identify slow-moving inventory.

In fact, a little effort and some research and planning will help you forecast demand and improve inventory turnaround times. As a result, you can map out your store’s overall operating cycle: the process of acquiring inventory, selling it, and collecting payment.

All in all, managing inventory effectively is a balancing act to be sure. But, maintains Jones, one that in the end can benefit both you and your customers.

“Making sure your customers can get your products when they want them while at the same time minimizing your investment in inventory will help you maximize your profits.”


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