How Can Small Businesses Avoid Excess Inventory?

One of the most difficult aspects of business that startups struggle with is getting inventory just right. Having enough inventory to meet demand may be vital, but having too much can spell the end of your business. Even big companies like Microsoft and H&M fall into this trap from time to time, so how can businesses that lack their experience and capital get inventory right? Here are some tips.

Keep Inventory to a Minimum

It may sound counterintuitive, but the best inventory, when viewed from a cash perspective, is an empty one—it means goods have already been sold and you’ve got the money for them in the bank.

Producing on demand is ideal, but not every company works that way, and that’s okay. If you’re expecting demand for your goods to grow, you should absolutely make sure you have enough on-hand to meet the higher sales, but you don’t want to overdo it, because there’s no guarantee those sales will come.

Consider Just-in-Time Manufacturing

Just-in-time, or JIT, manufacturing can cost more, but if it works for your business, it can prove to be a better way of improving your cash flow than keeping unsold inventory around. Instead of producing and storing goods, you can shift that cost to suppliers. Come up with a contract that gives you some flexibility, while getting suppliers to produce on demand.

Target Your Inventory

Having a positive mindset is great, but being too optimistic about the potential of your business can spell disaster. Consider targeting your inventory to meet the needs of priority customers in your best market. Once you’ve mastered staying on top of their demand, you can worry about the other customers as things become more stable and you’ve got a steady stream of cash coming in.

Businesses of all sizes need to refine their inventory management to avoid stockpiling and make sure they’re keeping the least amount of inventory on hand as possible to be successful.

This blog post was based off of an article from Entrepreneur. Read the full article here.