Are You Holding Too Much Inventory—or Not Enough?

Inventory Management & Optimization: Finding the Right Balance for Your Business
For many business owners, inventory feels like a moving target. Hold too much, and you tie up cash in product that collects dust. Hold too little, and you risk lost sales, delayed delivery, or missed production deadlines. Getting inventory “just right” isn’t just good operations—it’s a critical part of financial strategy.
As a CFO working with privately held and family-owned businesses, I’ve seen firsthand how inventory management can make—or break—profitability. Especially in companies where products are physical, seasonal, or complex, inventory can quickly become the largest (and least optimized) asset on the books.
Why Inventory Management Matters
When your inventory isn’t aligned with demand, it impacts much more than just your warehouse space:
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Cash Flow: Excess inventory ties up working capital that could be used for payroll, marketing, or growth.
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Profitability: Overstocked or obsolete items can lead to write-offs or discounting.
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Customer Satisfaction: Poor inventory planning means delayed orders, missed deadlines, and lost trust.
Optimizing inventory is about more than reducing stock. It’s about understanding what to hold, how much, and when—so you can meet customer demand without wasting resources.
Key Considerations for Better Inventory Strategy
1. Know Your Turnover Rate
How quickly are you selling and replenishing inventory? If it’s sitting for 90+ days, it may be time to revisit your purchasing or product mix. High turnover is healthy, but too fast might mean you’re running lean and risking stockouts.
2. Segment Your Inventory
Not all inventory should be treated equally. Identify which items are your fast-movers, which are seasonal, and which are high-value but slow-selling. This helps prioritize space, capital, and forecasting effort.
3. Forecast Intelligently
Inventory planning starts with accurate sales forecasting. That means blending historical data with current market trends, and staying agile enough to pivot when things change.
4. Align Teams Around Inventory Strategy
Finance, sales, operations, and procurement need to be on the same page. When these teams aren’t talking, you end up with overordering, poor timing, or misaligned priorities.
A Practical Step You Can Take Today
Start by running a basic inventory analysis:
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What items are moving too slowly?
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Where are you overstocked?
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How much working capital is tied up in inventory today?
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Do you have a reorder strategy based on actual demand?
If you’ve never done this—or haven’t done it recently—it’s a great time to take a fresh look.
Need a Second Set of Eyes?
I’m offering free consultations this month to help business owners get a better handle on their inventory strategy. Whether you're drowning in slow-moving SKUs or worried about stockouts, I’d be glad to help you think through the numbers and build a smarter plan.
Inventory doesn’t have to be a guessing game. With the right approach, it becomes a driver of growth, not a drain on resources.
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