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Denise Loter-Koch
QuickBooks ProAdvisor & Software Consultant
Portland, Oregon
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Effective Inventory Management

Meet Customer Demand, Minimize Expenses, and Maximize Efficiency by Properly Managing Inventory.
Written Mar 25, 2011, read 10411 times since then.


Inventory is a list of goods available in stock, including raw materials, work in process, and finished goods. Having inventory in stock is necessary for a few reasons. Firstly, time is needed to complete each stage of a supply chain. In order to avoid long wait time, inventory must be available to satisfy consumer demand.

The goal of having this inventory available is to avoid consumer dissatisfaction, potentially resulting in loss of sales. Secondly, exact demand cannot be predicted. Inventory is often kept in stock to absorb the shock of erratic demand. Finally, economies of scale exist. It is often more economical to buy a unit in mass rather than in smaller quantities. This incentivizes companies to hold inventory.

Though holding inventory is necessary, doing so is costly. Therefore, managing inventory becomes essential; it allows a company to minimize cost while continuing to meet customer demand.  

Managing inventory must be done effectively and often across many locations for a variety of products in different sizes, colors, and with varying features. A company strives to manage the precise amount and location of distinct products and track each product until the point of sale. Computerized inventory management systems make this possible through several key features.  

1. Categorization of Products

Firstly, companies can categorize groups of product by their distinct features. The businesses can then look up a product group on the management system and know the exact amount and location of the products in real time. Furthermore, by making distinctions between groups of products, a business can easily see which products are popular and which are slow to sell. This leads to more informed inventory purchases.  

2. Ability to Streamline Inventory Purchase and Lower Cost

Computerized inventory management systems also streamline the inventory repurchasing process. Companies are alerted when a specific inventory group reaches a predetermined minimum level and informs the business it is time to repurchase certain inventory. The system then searches for the lowest price on those items. Over a period of time computerized systems can track and prepare a report on inventory purchased, including vendors who have consistently offered the lowest prices. This results in companies easily and consistently receiving the best available prices.

3. Easily Track Trends

Other helpful reports that can be generated using a computerized inventory management system are trend reports. A business effectively tracks trends by viewing historical data of sales. Companies obtain insight of seasonal or monthly sales trends allowing them to better anticipate product demand.

4. Integration of Financial Software and Ability to Generate Custom Reports

Finally, the majority of inventory software is user friendly and can save a company time and money. The systems manage inventory electronically and do not require inventory to be counted and reported manually. Reports are generated at the click of a button rather than collecting and charting data. Further efficiency is created by linking inventory management systems to a company’s accounting software. When a product is sold, both systems are updated in real time with no need to re-enter data.

Even though inventory is a large expense for a business, there are ways to keep this expense to a minimum while effectively meeting customer demand. A computerized inventory management system provides an efficient means to track and analyze inventory.

Learn more about the author, Denise Loter-Koch.

Comment on this article

  • Disconnecting Oughta-Pilots; Creating Lives 
Beaverton, Oregon 
DeBorah Beatty
    Posted by DeBorah Beatty, Beaverton, Oregon | Mar 27, 2011

    Well said, Denise. Tracking inventory is a way to manage job costing and profitability data. Using third party inventory systems like Fishbowl or Rapid Inventory or even Intuit's new Advanced Inventory is a way to get a handle on these.

  • QuickBooks And Xero Outsourced Contractors Bookkeeping Services 
Lynnwood, Washington 
Randal DeHart, PMP, QPA
    Posted by Randal DeHart, PMP, QPA, Lynnwood, Washington | Mar 28, 2011


    You certainly understand inventory and you have some good methods for controlling and managing it.

    Warm Regards,


  • QuickBooks ProAdvisor & Software Consultant 
Portland, Oregon 
Denise Loter-Koch
    Posted by Denise Loter-Koch, Portland, Oregon | Mar 28, 2011

    Thanks for the comments DeBorah and Randal!

  • Management and International consultant 
Tokyo Japan 
Shigeo Sunahara
    Posted by Shigeo Sunahara, Tokyo Japan | Mar 29, 2011

    Hi Denise, It is a very impressive article. As you strongly advocate, inventory management is very important. Socialism in the former Soviet Union did not work well partly because Russians back then knew little about inventory management. They stocked as much inventory as possible to avoid stock shortage for fear of accusation from the upper organization.

  • Time Management 
Long Island City, New York 
Harri Jussila
    Posted by Harri Jussila, Long Island City, New York | Feb 10, 2012

    Thanks for sharing this. I also cannot stress enough the importance of having a good inventory management system. A computerized inventory management system will definitely help any businesses that deals with inventory a lot as it improves efficiency and helps to track trends.

    Harri - Time Management

  • QuickBooks ProAdvisor & Software Consultant 
Portland, Oregon 
Denise Loter-Koch
    Posted by Denise Loter-Koch, Portland, Oregon | May 09, 2014

    Yup Harri, and on top of tracking inventory trends, when you combine inventory software with accounting software (ex: Fishbowl Inventory with QuickBooks) you are able to get a complete picture from product intake, to product sale. With a desire to fully understand their finances, business owners are needing to know the value of their inventory, both on the shelf and when sold, for a complete financial analysis.