Inventory Implementation and Management

Inventory Implementation Setup & Management: Taking Inventory from Headache to Profit

The Invisible Drain in Your Business: What Happens When Inventory Runs Wild. Imagine this. Your business is humming along without a hitch, shelves are stocked, and everything looks perfectly under control.

Then, quietly, the trouble starts piling up. Products start accumulating in storage with no buyers in sight. Cash gets trapped in items that are gathering dust on your shelves. Or worse yet, you’re suddenly out of a hot-selling product because the reorder didn’t land in time.

To put it plainly, your inventory went rogue, and now it’s draining your business without making a sound.

And that’s where the real trouble begins.

How Inventory Drains the Bank

It’s surprising how much profit and time an unmanaged inventory can quietly drain from your business. Here are some of the biggest leak points:

• High carrying costs. Studies estimate that inventory carrying (or holding) costs land in the
  20–30% of inventory value range annually. For every $1 million of inventory you hold on to, you might be spending $200,000 to $300,000 per year simply because it’s just sitting there.
  These costs include warehousing, utilities, insurance, handling, administration, depreciation, maintenance, and opportunity costs.
• Cash flow tied up. When inventory sits idle, your working capital is stuck in stock and not available for marketing,
  R&D, payroll, new equipment, or debt reduction. Excess inventory isn’t just about running out of space. It’s a major drain on cash flow,
  profits, day-to-day operations, and peace of mind.
• Obsolescence and spoilage. Products tied to trends, seasonality, technology changes, or limited shelf-life (spoilage) are at constant risk. If you’re overstocked and demand shifts, you may end up with goods that must be deeply discounted or written off entirely.  If some of that inventory becomes obsolete or has to be liquidated, your margins can take a big hit. Sometimes, you recover only pennies on the dollar.
• Lost sales from stockouts. On the flip side, if you don’t have enough stock or you mistime orders, you risk
  stockouts and missed revenue. A recent study in fast-moving consumer goods found global average out-of-stocks around 8.3% of items. Essentially, every one of
  those is a sale that never materializes.
• Hidden process costs. Poor inventory control leads to extra labor (manual counts, wasted time and constant fire drills), more errors
  (wrong orders, bad counts), higher shrinkage (loss and/or theft), and a bloated catalog full of slow movers that complicate purchasing,
  storage, and forecasting.
• Operational mishaps. Operationally, too much inventory clogs warehouses, slows picking and packing, creates more errors, and reduces your agility
  when demand changes.

In short: inventory mismanagement directly eats into profits, prevents growth, consumes leadership’s time, and reduces your strategic flexibility.

How We Solve the Problem

This is where a specialized service like Inventory Implementation Setup & Management comes in. And as expert number crunchers, there is no one better than a team of accountants for this. The goal is simple: turn inventory from a silent profit-killer into a lever for cash flow, profitability, and control.

Here’s how we can help you tackle the problem.

1. Set the Baseline: Count & Inspect

• On-site visits. We come to your location (warehouse, stockroom, production floor, etc…) to see what’s
  really happening, not just what your spreadsheet says. This in-person view often reveals issues that never show up in written reports.
• Physical inventory counts & reconciliation. We coordinate physical counts and match those against system records.
  This uncovers shrinkage, data errors, obsolete items, and slow-moving stock.
• Inventory valuation review. We ensure inventory is valued correctly (FIFO, LIFO, average cost, etc.),
  identifies all items that should be written down, and we make sure your financial statements reflect reality.

2. Diagnose the Drivers Behind the Numbers

• Analyze stock turnover. Which items move fast? Which ones are dead weight? As accountants, we calculate turnover ratios
  and highlight SKUs that are tying up cash without contributing much to revenue.
• Determine reorder points and quantities. Using sales history, lead times, and variability, we help you optimize “when to order,” “how much to order,” and just as important, “when not to order.”
• Identify hidden costs. We quantify carrying costs such as storage, insurance, labor, and obsolescence risk in order to show you
  exactly how expensive excess inventory really is.
• Review processes. Our team of accountants map how purchasing, receiving, storage, and sales talk to each other (or don’t).
  Misalignment between sales forecasts, purchasing, and operations is a common root cause of both overstocking and stockouts.

3. Implement Inventory Controls & Strategy

• Establish inventory policies. This includes defining safety stock levels, reorder triggers, min/max stock levels,
  and deciding whether to use periodic or perpetual counting. Techniques like ABC analysis (classifying inventory by value and velocity) help
  focus attention where it matters most for your business.
• Improve visibility with systems. We help you set up or refine systems that provide real-time stock levels,
  alerts for slow movers and excess inventory, and dashboards for quick decision-making.
• Adopt a “just enough” mindset. Instead of “just in case” inventory that ties up cash, the focus shifts to “just enough”
  to meet demand reliably while keeping carrying costs in check.
• Training and procedures. Staff get clear procedures for receiving, counting, and reporting. We document
  these processes so they’re followed consistently, and not just when a someone happen to remembers.

4. Tie Inventory Directly to Tax & Financial Strategy

• Tax-smart inventory decisions. Inventory valuation methods, write-downs for obsolete goods, and correct classification
  can all affect taxable income. We make sure your inventory strategy and your tax strategy work together.
• Better working capital management. By freeing up cash from excess inventory, you can reduce interest costs, improve
  liquidity, and increase your return on invested capital.
• Accurate financial reporting. Clean inventory records mean more accurate margins, better budgeting, and fewer unpleasant
  surprises during audits or due diligence.

5. Ongoing Oversight: Inventory as a Living System

Inventory isn’t “set it and forget it.” Demand changes, suppliers change, new products launch, old ones fade. That’s why this kind of service
often includes ongoing oversight:

• Regular cycle counts and reconciliations to keep records accurate.
• Periodic reviews of slow-moving or obsolete stock and recommendations for liquidation or repositioning.
• Updates to reorder points and safety stock levels as sales patterns or lead times change.
• On-site check-ins to see the real-world impact of process and policy changes.

With our accounting team watching the numbers and the process, inventory becomes a well-managed system instead of an uncontrollable recurring headache. If you need help getting a grip on your inventory, we are just a phone call away!