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3 Ways to Boost Your Working Capital With Better Inventory Management

Posted by Alan Brown on Mar 8, 2019 4:20:30 PM

Inventory Management Working Capital

 

Staying on top of your inventory management is an incredibly effective way to improve your small business working capital. Having too much capital invested in inventory can put your company at risk if you ever have a need for additional cash on hand. To help better control your inventory levels (and your working capital), follow these three strategic tips.

 

1. Audit Regularly

The first step to improve your inventory management (and, consequently, your working capital), is to audit your resources. While you should always track your inventory with some type of software, it’s also important to do physical, in-person checks as well. This is especially important if you have large amounts of inventory and a wide variety of products. While you may think audits only need to be completed once a year, completing the process biannually or even quarterly can make it less of a headache and help you better pinpoint the cause of any discrepancies you might have.

 

2. Organize Inventory to Sell Older Stock First

Even if you sell non-perishable goods, it’s smart to get rid of your older stock before your newer stock. Spoilage can still occur through age, moisture, and other external conditions, so it’s smart to use the “First In, First Out” method (also called FIFO). Wherever you store your inventory, keep older products toward the front and place newer inventory behind. This can take a bit more time, especially if you carry a lot of stock, but it’s better for your quality control and not wasting capital on spoiled goods.

 

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3. Use Holistic Forecasting

No matter how long you’ve been in business, there’s always room to level up the sales forecasting for your company. This process helps you manage your inventory and your marketing efforts at the same time. Start off by looking at how your sales performed over the same period of time in years past. This will give you a baseline of what to expect in terms of inventory needs. Also look at any broader industry trends that may contribute to potential changes. You can also incorporate your current growth rate for the year, new sales contracts you’ve secured, and new marketing campaigns you plan to launch.

 

The Bottom Line

Proper inventory management can seem like a daunting process, but it’s crucial in order to accurately plan for your company’s needs without depleting your working capital.

 

Topics: Wokring Capital Loan, Inventory, Inventory Financing, Working Capital Management, Working Capital Strategy

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