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What is Inventory control

Inventory control is the process whereby management ensures that inventory on hand is kept safe and in such a manner that it would enhance the entity’s cash flow.

Why is inventory control important

Management must understand what inventory they have, where it is kept and how and when inventory is moved both in and out. Doing proper inventory management helps management to lower costs, prevent fraud, enhance customer satisfaction and provides the basis for accurate financial data for reporting purposes. By making sure that your business has enough inventory on hand, customer satisfaction is enhanced by being able to immediately tend to their needs, and by ensuring just enough inventory is kept on hand, you ensure that valuable working capital is not locked away in large volumes of inventory stored away. Increased inventory levels also comes with the burden of the extra cost on insurance as well as storage fees.

How inventory control can be executed

Various methods of inventory control can be performed by companies and management. Software can be used as a very valuable tool to this effect. The following are some pointers that can be done easily and cost effectively by management:

  • Ensure that you have responsible staff in charge of inventory, with adequate segregation of duties, as well as authorisation procedures in place
  • Determine what the re-order level of inventory for your business is
  • Determine what the most effective level of inventory production is in your business’ manufacturing processes
  • Ensure your inventory is physically safeguarded against unauthorised access
  • Ensure your inventory is adequately insured against various risks
  • Ensure your inventory is properly sorted, marked, labled, and stored
  • Ensure that regular stock counts are performed and reconciliation between the accounting records and actual stock on hand is performed


Inventory control is a very important task in the operational activities conducted by management. Please contact us today should you require any assistance in strenghtening your controls over inventory.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)