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Better Terms With Vendors and Suppliers: Inventory management also provides knowledge of which products sell and in what volume, insights you can use to negotiate better prices and terms with suppliers.Greater Insights: You can also easily spot sales trends or track recalled products or expiry dates with inventory tracking and stock control.Increased Profits: A better understanding of both availability and demand leads to higher inventory turnover, which leads to greater profits.Avoiding Stockouts and Excess Stock: Minimize the number of days, if any, that items are out of stock to avoid carrying too much inventory with better planning and management.Inventory is also at risk of theft, loss from natural disasters or obsolescence. Carrying costs include storage handling and transportation fees, insurance and employee salaries. Cost Savings: Stock costs money until it sells.

Reduced Risk of Overselling: You won’t oversell products if you have better tracking of what’s in stock and what’s on backorder.

Better Inventory Accuracy: This allows you to know what’s in stock and order only the amount of inventory you need to meet demand.

Inventory management mitigates that challenge and offers these benefits: Types and quantities of stock often change, making it challenging to track and maintain. The practice also determines when and what new stock to order to avoid shortages and helps a company maintain a healthy inventory turnover ratio. Inventory management tracks stock as a company adds, sells, moves and stores it. Assets are items, like machinery, that a company uses to manage or create inventory. These are inventory assets, and may sometimes be referred to as simply inventory. Companies sell stock or use raw materials from their inventory to make goods to sell. Inventoryīoth inventory and inventory assets are company assets. During peak production or sales times, production lines and retail channels require a consistent supply of stock to satisfy customers. Inventory assets are key to a business because asset shortages affect revenue. In manufacturing, inventory assets serve as the buffer in case there’s a spike in demand. In accounting, a company records inventory as a current asset on its balance sheet. Inventory assets are the finished products, parts or raw materials that a company intends to sell.

Inventory that doesn’t turn over after 12 months is considered dead stock, or obsolete inventory, and is counted as a liability. Current assets also include accounts receivable and expenses, such as insurance policies. In accounting, inventory appears as current assets because a company keeps it for less than 12 months. Assets include equipment, fixtures and furniture, and the amount of assets a company has at any given time is usually stable. Inventory includes products, parts and materials, and how much is on hand may change over time. Assets offer the business a different type of value, helping the company buy and manage inventory. The difference between assets and inventory is that a company sells inventory to make money. What Is the Difference Between an Asset and Inventory? Assets include the equipment, fixtures and furniture that an organization owns or leases and intellectual property like patents. What Is an Asset?Īssets are resources that a company uses to run a business, manufacture items or otherwise create value. Read the article on inventory basics to learn more about the types of inventory. The four types of inventory are raw materials, work in progress, finished goods, and maintenance, repair and operations (MRO). Inventory, also called stock, is the products, raw materials, supplies or parts a company holds to sell or build new products. Asset management also deals with ensuring asset value and availability. Asset management, on the other hand, monitors items an organization uses internally, which are not for sale. One of the goals of inventory management is to find the right balance of stock to satisfy customer demand or, in a manufacturing environment, supply production lines. But inventory management focuses on the flow of items a company sells or parts it uses to make goods. In other words, inventory management and asset management both track a company’s property. Asset management tracks the equipment and supplies that a company uses to run the business. Inventory management tracks the stock that comes in and goes out of a company’s stores and warehouses. East, Nordics and Other Regions (opens in new tab)