Knowledge Centre
Keep the right stock, cut waste, and free up cash tied in shelves.
Inventory Management
1. What You Need to Know
Inventory management is about knowing what to order, when to order it, and how much to keep on hand.
Too much stock ties up cash, while too little stock means lost sales. Accountants help strike the balance by analysing sales data, forecasting demand, and implementing systems that keep inventory lean but effective.
2. Why It Matters to You
Good inventory management drives sales and protects cash.
Improves cash flow by avoiding overstocking.
Reduces waste from obsolete or expired items.
Ensures customers always get products on time.
Provides accurate stock data for decision-making.
3. Frameworks, Standards, or References
Managing inventory well blends accounting systems with operational frameworks.
Frameworks to use: Economic Order Quantity (EOQ), ABC analysis (stock categorisation), Just-in-Time (JIT) inventory.
Standards & compliance: IFRS for SMEs (inventory valuation), Companies Act (reporting obligations).
References: CIBA guides on SME management accounting.
What your accountant will actually do:
Analyse sales trends to forecast demand.
Calculate carrying costs and reorder points.
Set up software to track stock levels in real time.
Report on stock turnover and highlight inefficiencies.
4. How to Apply
Steps to improve inventory management with your accountant:
Track sales and stock data consistently.
Work with your accountant to identify reorder points.
Implement an inventory management system.
Review slow-moving stock and cut waste.
Adjust purchasing policies as customer demand changes.
5. Common Mistakes to Avoid
Avoid these stock management errors that cost money:
Over-ordering → Leads to cash tied up in shelves.
Ignoring dead stock → Review regularly and clear out waste.
No forecasting → Use data, not guesswork, for reorders.
Running manual systems → Invest in reliable inventory software.