![]() Public companies must track inventory as a requirement for compliance with Securities and Exchange Commission (SEC) rules and the Sarbanes-Oxley (SOX) Act. ![]() Inventory management is vital to a company’s health because it helps make sure there is rarely too much or too little stock on hand, limiting the risk of stockouts and inaccurate records. Poor inventory turnover can lead to deadstock, or unsold stock. A business does not want more stock than sales. An accounting measurement, inventory turnover reflects how often stock is sold in a period. One measurement of good inventory management is inventory turnover. Therefore, too much stock costs money and reduces cash flow. ![]() Before it sells, inventory (although reported as an asset on the balance sheet) ties up cash. The practice identifies and responds to trends to ensure there’s always enough stock to fulfill customer orders and proper warning of a shortage. It tracks inventory from purchase to the sale of goods. Inventory management helps companies identify which and how much stock to order at what time. At the end, you will find an FAQ list on inventory. In this article, learn about inventory management and its related disciplines from inventory experts.
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