What is inventory management?

Inventory management is the process of managing the goods your business plans to sell. This involves acquiring, storing, organising and tracking those goods.

Inventory management also involves keeping records of changes in your inventory over time. This helps you keep the right amount of each product or item in stock to keep up with customer demand.

Sales forecasting is another big part of inventory management. If your inventory gets too low, you might not be able to keep up with your customers’ demands. But if your inventory is too high it will tie up your money and increase storage costs. You’ll also have to pay higher taxes because of the large value of your inventory.

It’s often useful to have safety stock, also known as buffer stock. This means keeping slightly more goods than you expect you’ll need. This is useful if demand is unusually high or if you need to exchange a faulty or damaged product.

 

Related terms:
What is cash flow management?
What is business accounting?

Related Xero feature:
Control your stock with inventory management software

Related Small Business Guide:
How to create an efficient inventory management system

Accounting Terms

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What is inventory management?

Inventory management is the process of managing the goods your business plans to sell. This involves acquiring, storing, organising and tracking those goods.

Inventory management also involves keeping records of changes in your inventory over time. This helps you keep the right amount of each product or item in stock to keep up with customer demand.

Sales forecasting is another big part of inventory management. If your inventory gets too low, you might not be able to keep up with your customers’ demands. But if your inventory is too high it will tie up your money and increase storage costs. You’ll also have to pay higher taxes because of the large value of your inventory.

It’s often useful to have safety stock, also known as buffer stock. This means keeping slightly more goods than you expect you’ll need. This is useful if demand is unusually high or if you need to exchange a faulty or damaged product.

 

Related terms:
What is cash flow management?
What is business accounting?

Related Xero feature:
Control your stock with inventory management software

Related Small Business Guide:
How to create an efficient inventory management system

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