Money Matters

How to avoid common inventory mistakes

Inventory Mistakes to Avoid

If you are like many small business owners, inventory makes up a significant portion of your operating expenses. Effective inventory management is essential when trying to avoid costly errors like ordering items in excess volume, missing stock, and managing inefficiencies.

Below are a few common inventory management issues and some suggestions on how to correct them.


Stale inventory costs your business money each day as it sits on your sales floor or in your stock room. Overstocking can happen when a manager fears losing sales if a high demand product runs out when bulk orders are made to save costs, or because of poor inventory management.

Turn your dead stock into cash by liquidating it at discounted prices. You can also try returning excess goods to your vendor, but you may have to pay a restocking fee.

  • Track your inventory so you know when stock levels are high so you can avoid unnecessary re-stocking of items. Watch for spending trends to more accurately predict when it is time to re-order your best sellers and phase out poor selling items.
  • Invest in a perpetual inventory system that gives you real-time data on current inventory levels and automates reordering as needed and tracks the performance of products and services.

Loss from inaccurate tracking

Losing stock is a serious issue for business owners whether the cause is theft or a simple inventory miscalculation.

  • If you are still doing inventory manually, switching to an automated system will improve accuracy by reducing the potential for human error.
  • Take care to take note of any items you cannot sell due to breakage or other damage. These can be written off to recoup the cost.
  • Staying on top of your current inventory will allow you to quickly identify when something is amiss– including the unpleasant possibility of employee theft.

Outdated inventory management systems

If you are still using spreadsheets for tracking inventory, you might want to consider updating to professional accounting software. You will improve efficiencies and reduce errors, especially when responsibility for inventory tracking is shared among employees.

Unlike a paper-based or spreadsheet system, accounting software will make your inventory process more efficient because it is already set up to handle the task—freeing your time for other necessary business activities.

Accurate inventory tracking allows you to ensure you always have enough stock on hand, so you do not lose sales or customers. Invest in a system that will protect your business from costly errors that reduce profitability and could potentially put you out of business.