Home » How Poor Inventory Management Affects Your Business

How Poor Inventory Management Affects Your Business

Rahul Maingi

By admin, June 29, 2017

Share this...

Inventory is included in company’s current asset and plays a major role in ongoing business operations. It contributes to revenue generation if managed properly and leads to losses when managed poorly.

Inventory management involves supervising the supply of goods from the producers to the warehouses and then to the point of sale. It includes maintaining a detailed record of goods received, sold or returned. In the absence of a proper inventory control, the business can face several long-term damages. Let’s find out how it affects the business.

1) Imbalanced Inventory

If the inventory is not managed well, then it becomes hard to maintain a balanced stock. Overstocking and understocking becomes evident when the real-time information of products sold, returned, damaged or purchased is lacking thus creating an imbalance.

2) Delayed Delivery of Orders

Fulfilling the orders on time becomes impossible in the absence of proper stock information. It becomes difficult to track how many goods are available in the warehouse and how many goods need to be purchased. As a result, the shipping and delivery of orders get delayed.

3) Increased Costs

Overstocking is costly for the business. When the inventory is stored for longer periods, the warehouse cost increases and so does the cost of maintaining the inventory. It restricts restocking due to the scarcity of storage space. A large amount of money is spent on items that are not profitable for the business such as old stock, leading to increased cost of the product.

4) Unsatisfied Customers

On-time delivery and quality products are essential for maintaining the customer base. But, poor inventory management leads to delayed shipment of orders. When the customers don’t get their order on time, they start losing faith in your services and look for alternatives, thus leading to increased customer dissatisfaction and decreased customer loyalty.

5) Wasted Time

Too much time and resources are wasted on tasks that can be completed easily if the inventory is balanced well. The time spent on fixing the issues caused by poor inventory management could be utilised on actions that provide returns to the business.


Never underestimate the importance of proper inventory management. It can have a dramatic financial impact on your businesses’ profit and growth. Use the right system and follow an organised way of tracking the inventory.

The Virtuous Bookkeeping explores ways for entrepreneurs to enjoy independence and better run their business. Join over 10,000 subscribers and get our best articles delivered via email.

Book a Free Consultation