Running out of a product your customers want can lead to dissatisfaction and lost sales, especially if they opt to buy from another retailer that has the item in stock. You may have to mark it down to sell it, thereby reducing your profit margin.Д«ut having too little inventory, or running short, is an issue, too. Having too much inventory is risky because you run the risk of being stuck with merchandise that is obsolete or past its prime.

However, if demand picks up or declines in between deliveries, you can end up with problems. If youвЂ™re selling 250 pairs of shoes a week and you receive deliveries every Friday, ideally youвЂ™ll receive 250 this Friday, to keep up with demand. To be successful using just-in-time, you have to have an accurate idea of how much youвЂ™ll sell in between product deliveries. As a result, you have less inventory sitting around, waiting to be produced or sold. Using a just-in-time approach means that materials are delivered just in time to meet current customer demand. One way to try and reduce the size of your on-hand inventory is to use a just-in-time strategy. Sometimes the inventory is lost, other times it is stolen. Companies that do a daily inventory count are considered to take perpetual inventory, because their count is always current.ДЄny difference discovered between the inventory count on the companyвЂ™s balance sheet and what is actually on-hand is termed вЂњshrinkage.вЂќ ItвЂ™s the inventory that is missing, for whatever reason. In order to ensure that all accounting records are up-to-date and accurate, businesses manually take an inventory count at the end of each accounting period, which is typically quarterly or annually. Inventory is generally the largest current asset вЂ“ items expected to sell within the next year вЂ“ a company has.

Raw materials (to be used to produce more finished goods).

Work-in-progress (meaning in the process of being made).Finished goods (that are available to be sold).Inventory is an accounting term that refers to goods that are in various stages of being made ready for sale, including:

Inventory meaning