Businesses will often (without realising) carry too much or too little inventory.

Inventory affects both the profit and loss and balance sheet of a business.  

By understanding this and how it can determine the financial performance of your business, you will be able to improve the profits in your business.

7 reasons to consider your stock levels include:

1.     Typically, stock decreases in value the longer it is held, due to stock becoming obsolete or perishing.

2.     The more stock that is held the greater the pressure placed on your cash flow.  This effects your Cash Conversion Cycle (CCC) as your cash is invested in the stock.

3.     Holding stock can increase your rental and insurance costs.   

4.     Holding excess stock increases the chance of pilferage.

5.     If you do not hold enough inventory you may be missing out on selling opportunities.

6.     You may not be able to take advantage of bulk discounts if buying and holding small quantities of stock.

7.     Buying in smaller quantities will create more transactions, this will increase your administration issues such as maintaining of paperwork, data entry, and creditors control. 

If you would like to discuss further please contact us:

McNamara & Company - Chartered Accountants, located minutes from the Melbourne CBD

www.mcnamaraandcompany.com.au/contact-us

Phone +61 3 9428 1062

Email admin@mcnamaraandco.com