Why Is Stock Control Important?

We’re guessing you’re here because your business handles stock, or you’re considering starting up a new business that sells goods. Are we right? Whether you’re in eCommerce or bricks and mortar stores, managing your inventory is a fine balancing act. Under stock, and you risk losing customers; overstock and you could be eating into your profits.

Ready to learn more? Let’s start with the basics.

What is stock control?

Stock control – you’ll also see it called inventory control – refers not just to the amount of stock a business owns, but also how a business keeps track of that stock. That’s everything from new goods coming in, items being sold, and products being returned, as well as everything that’s on the shelf waiting to be sold.

Stock control can be a complex business, and there isn’t a one size-fits-all solution. Getting it right helps businesses make sure they don’t tie up their money in stock that isn’t needed, or waste money on unnecessary storage costs.

The key benefits to managing stock effectively

Managing the stock that you have in your business can help you be more efficient in a number of ways.

Reduce storage costs

You know the phrase ‘left on the shelf’. This is exactly what businesses need to avoid; stock sitting on a shelf unsold and racking up storage costs. There’s also the cost of staff managing the products held in storage, as well as extra insurance payments to protect it all. These are costs which can be reduced by having an efficient stock control strategy.

Proper inventory management means having the right amount of products available, at the right time. You won’t need to spend any more on storage than is necessary, minimising overheads and maximising profits.

Reduce the risk of shrinkage and deterioration

An excess of stock inherently carries a higher risk of theft and unfortunately, most businesses will have to deal with theft at some point. Having proper stock controls in place means that inventory isn’t going to sit on the shelf unsold and potentially forgotten about, where it’s an easy target for thieves.

Sadly, thefts can also occur within the business from members of staff. Having the optimum amount of stock, and setting up systems to track it properly throughout its journey from delivery, to storage, to sales and returns, will minimise the risk of theft.

For businesses that sell perishable goods, stock control is even more important. Unsold stock sitting on a shelf going out of date is a loss waiting to happen. No business wants to be in a position where they’re throwing away stock just because it’s out of date.

Logging your stock at each point in its journey through your business is also a terrific way to spot areas in need of attention to reduce wastage. For instance, a restaurant whose drinks profits are lower than expected might be as a result of bar staff over-filling glasses. Those profits might be in the drip tray!

Great customer experiences

Although it can be tempting to minimise your investment and therefore risk by under stocking and operating on a demand basis, this is a risky strategy. Waiting lists might work to create hype for a one-off product or an anticipated product launch, but consistent ‘out of stock’ notifications will lead to customers voting with their feet and going elsewhere. Giving customers a great experience and keeping them coming back increases their lifetime value. And that boosts revenue. It’s a no brainer.

It works both ways too. Always carrying too much inventory can lead to persistent cut-price sales periods in order to shift the excess. This can damage a business’ reputation. Want to be known as a discount retailer? That’s a different story. But for brands looking to build their reputation outside of that, it’s a fine line between seasonal sales and always in discount.

Effective stock control reduces the need to discount, helping to uphold brand reputation. And a solid brand reputation means customers are more likely to return and recommend the business.

Better warehouse (or storage) organisation

This applies no matter how big or small a business’ storage space is. Getting the process right when starting out makes it easier for a business to grow efficiently.

  • Making it easier to locate your stock means a quicker sales process and improved customer satisfaction
  • Having stock clearly labelled and in manageable numbers means that customers are more likely to receive the right order the first time around. So, no returns due to ‘wrong item sent’ and no additional processing costs for the business
  • Staff are able to handle returns more effectively, getting stock back online or in-store ready to be sold, and minimising the financial impact.


Stock control for better cash flow forecasting

Balancing overheads with cash flow and profit is an art in itself. It’s not easy to get right but ordering the right amount of stock at the right time frees up cash to help businesses continue to invest and grow. Having cash tied up in unsold stock is one way to stall business growth. Especially for new businesses, where every penny counts towards getting off the ground.

–Did you know that with Pandle businesses can set future cash flow goals and view trends? Take a look at Pandle’s Cash Flow Forecasting reporting features to find out how businesses are making better informed decisions, powered by real data.

There’s more to business than stock control.

Okay, so this article is all about getting businesses on board with stock control. But while it’s clear that stock control is important, being overzealous can cause more harm than good.

Stock control is only effective if businesses have other systems in place to support it, such as quality control. Having the right amount of stock is all well and good, but it can’t tell you whether the quality of that stock is fit for purpose.

We advise taking a holistic view of stock control to ensure your businesses is efficient, but not blinkered to the importance of other elements.

I’m on board! Where do I get started?

Data is a business’ best friend. If you already use financial software like Pandle for reporting, these next steps are going to be easy as 1,2,3:

  • Monitor Profit and Loss – understand which products are selling and which aren’t.
  • Check in on your overheads – where can you optimise spend?
  • Look at transactions – what’s selling most? Is there a seasonal trend? This is customer data revealing exactly what’s in demand and when, use these insights as part of a good stock management strategy.

Find out what else Pandle can do for businesses like yours. We help thousands of businesses to manage their finances easily through ready-made reports and intuitive features. It’s even available as an app for on-the-go finance management. Get started today by creating a free account.

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible.

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