Inventory management: stop cash from sitting on your shelves

Every item on your shelves is cash you have already spent. Good inventory management frees that cash.

Know your numbers

• Inventory days = (average inventory ÷ cost of sales) × 365.
• Stock turnover = cost of sales ÷ average inventory.

Compare them by product group, not just in total.

Find the problem items

• Run an ageing report: items with no movement in 90 or 180 days.
• Use ABC analysis: the few items that make most of your sales (A) deserve the closest control.

Practical steps

1. 1Set reorder points based on real sales speed and supplier lead times.
2. 2Clear slow-moving stock with bundles or discounts before it becomes obsolete.
3. 3Count stock regularly — cycle counts every month beat one big annual count.
4. 4Reconcile the physical count with your system and investigate differences.

The accounting side

Obsolete or damaged stock should be written down in your books. Overstated inventory overstates profit — and your zakat base.