What is Inventory Management & Why is it Important?

What is Inventory Management

Whether you’re a manufacturer or distributor, effective inventory management is critical to the financial health and success of your business in many ways, some of which you may not even have considered before. For example, if you ever need working capital or funding for growth, your inventory could be used as collateral for flexible financing…but only if you know what you have, where it is, and how fast and effectively you’re putting it to work.

12 Good Things Effective Inventory Management Can Do For Your Business

  1. Decrease backorders and lost sales. Backorders are bad enough, but they also lead to lost customers if they happen too often or even just at a bad time.
  2. Speed up fulfillment. It’s easier to meet tight delivery dates if you always know what items you have in stock and can find and reach them quickly.
  3. Build your reputation for great customer service. Being able to supply what people and businesses want, when they want it, is critical in the age of Amazon. There’s no room in the market for companies who can’t deliver.
  4. Save money. Storing, handling and keeping track of excessive inventory wastes time and money. 
  5. Avoid tying up too much cash in inventory. There are more productive ways to spend your capital than on excess inventory. Invest in systems, people, processes that can move you forward.
  6. Help you understand what’s selling and what isn’t. Good record-keeping provides valuable insights on what sells and how quickly. And on what gets returned more or less frequently. Use these insights to tailor your operations and growth strategies.
  7. Prevent fraud. Identifying losses early and accurately can stop them from continuing. And knowing that losses will be identified early can be an effective deterrent.
  8. Save employee time and improve productivity. Automating your inventory management can eliminate trips to the stockroom, time pouring over manual spreadsheets, re-checking manual counts, etc.
  9. Improve ordering accuracy. You’ll know exactly what you need and when. Keeping records over time can enable you to automate your product or parts orders for even greater efficiency.
  10. Decrease unnecessary inventory losses. Less time on the shelf means less product expiration, damage or obsolescence.
  11. Improve your financial reporting.  You’ll have a clearer snapshot of your business’ financial health with an accurate assessment of your current inventory and turnaround periods.
  12. Show potential lenders that you’re in control of your business. Good management in one area indicates good management in other areas as well. Knowing your inventory inside and out—and communicating what you know to an experienced lender—is a good way to use your assets to help maximize your liquidity and growth potential.

As a specialty financing company with more flexibility than a traditional bank lender, Gibraltar is able to use its experience and resources creatively to meet the needs of middle-market businesses in critical stages of growth. If you are looking for flexible working capital based on your assets, read some of our case studies or contact us today for more information and an introduction to our team.

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