Walk into your shop.
The shelves are full.
Your warehouse is packed.
You have cartons of products waiting to be sold.
At first glance, it looks like the business is doing well.
But then you check your bank account.
There is barely enough cash to restock your fastest-selling product.
So you ask yourself:
“How can I have this much stock and still have no money?”
Here is the uncomfortable answer:
Your money may be sitting on the shelf.
Having plenty of inventory does not automatically mean having a healthy business.
If too much of your cash is tied up in products that are moving slowly, that money is not readily available for other business needs. Businesses that carry inventory can have money tied up in stock even when they appear profitable on paper.
The Problem
One of the easiest mistakes a product-based business can make is confusing having stock with having a healthy inventory system.
A business owner may proudly say:
“I have plenty of products.”
But the better questions are:
Which products are selling?
Which products are barely moving?
How long has each product been sitting there?
How much money is currently tied up in inventory?
Which products need to be reordered?
Without those answers, buying more stock can become a habit rather than a business decision.
And that can create a dangerous cycle:
Buy → Stock shelves → Slow sales → Buy more → Cash becomes tight.
The business looks busy.
But the cash becomes trapped.
A Realistic Example
Let's imagine that Daniel runs a small cosmetics business.
He has ₦1,000,000 available for purchasing stock.
Instead of studying which products sell fastest, he uses most of the money to buy a wide variety of products because he wants customers to have many options.
Three months later, his shop looks impressive.
There are products everywhere.
But when he reviews his sales records, he discovers something surprising.
A few products are selling almost every week.
Some products sell occasionally.
And several products have barely moved.
Daniel has a stock problem—not necessarily because he has too little stock, but because too much of his money is sitting in products that are not moving fast enough.
This is a fictional example, but the lesson is practical:
Inventory should be managed according to evidence, not just appearance.
The Impact
1. Your cash can become trapped
When you spend ₦500,000 buying products, that ₦500,000 has left your available cash.
Until the products are sold and the money is collected, you cannot use that same cash for another purpose.
This is why inventory and cash flow are connected.
2. You may keep buying products that don't sell
Without sales and inventory records, you may continue purchasing products simply because you believe customers want them.
Your records may tell a different story.
3. You can run out of your best sellers
This is the opposite problem.
You may have ₦1 million worth of stock but still disappoint customers because the particular products they actually want are out of stock.
The total value of your inventory doesn't tell you whether you have the right inventory.
4. Products can sit for too long
Some products are affected by changes in demand, seasons, trends, packaging, technology or customer preferences.
The longer slow-moving stock remains untouched, the more difficult it can become to recover the money invested in it.
5. You may mistake stock value for business performance
Having ₦2 million worth of products in your shop does not mean the business has ₦2 million in profit.
Inventory is an asset, not automatically revenue or profit.
Practical Solutions
1. Know exactly what you have
Create an inventory record.
At minimum, track:
| Product | Quantity | Cost Price | Selling Price | Quantity Sold | Quantity Remaining |
|---|---|---|---|---|---|
| Product A | 50 | ₦4,000 | ₦6,000 | 35 | 15 |
| Product B | 30 | ₦7,000 | ₦10,000 | 5 | 25 |
| Product C | 20 | ₦3,000 | ₦5,000 | 18 | 2 |
Now you can see more than just “we have stock.”
You can see what is actually happening.
2. Identify your fast-moving products
Look at your sales records.
Which products consistently sell?
Which ones sell occasionally?
Which ones hardly move?
This information should influence your purchasing decisions.
Inventory turnover—the rate at which inventory is sold and replaced—is one useful measure for understanding how quickly products move.
3. Don't reorder simply because something is running low
A product being low in quantity does not automatically mean you should immediately buy more.
Ask:
How quickly does it sell?
How much profit does it generate?
How often do customers request it?
How long does the supplier take to deliver it?
Do I have enough cash to reorder it without creating another problem?
Reordering should be connected to actual demand.
4. Watch your slow-moving products
Create a list called:
“Products That Need Attention.”
Every month, review products that have not sold or have sold very slowly.
Then decide what action makes sense.
Depending on the business, that could mean:
Improving the product's visibility
Creating a promotion
Bundling it with a popular product
Changing the sales approach
Reducing future purchases
Returning stock where supplier terms allow
Discontinuing the product
The important thing is to notice the problem early.
5. Connect sales records to inventory
Every sale should affect your stock records.
If you sell 5 units of a product, your inventory should reduce by 5.
This sounds simple, but when sales and inventory are recorded separately—or inventory isn't updated consistently—business owners can end up making purchasing decisions using inaccurate information.
Modern POS systems can connect sales information with inventory records and help businesses identify best-selling products and low-stock items.
Common Mistakes
Buying because the supplier has a good deal
A discount is not automatically a good deal.
If you buy 100 units of a product you cannot sell, you have simply put more money into slow-moving stock.
Buying more of everything
Not every product deserves the same purchasing budget.
Your sales data should help you determine where your money should go.
Ignoring products that don't sell
Unsold stock doesn't disappear just because you stop looking at it.
Looking only at quantity
Having 100 units of a product sounds impressive.
But what matters is whether customers actually want those 100 units.
Not recording stock movement
If you don't know what came in, what was sold, what was damaged, what was returned and what remains, your inventory number may not be reliable.
What You Can Do Today
Pick 10 products from your business.
For each one, write down:
Current quantity
Cost price
Selling price
Units sold this month
Units remaining
Then put each product into one of three groups:
🟢 Fast-moving
🟡 Moderate-moving
🔴 Slow-moving
Now look at the red group.
Ask yourself:
“How much of my money is currently sitting in these products?”
That number may tell you something important about your cash flow.
Then look at your fast-moving products.
Ask:
“What would happen if these products went out of stock tomorrow?”
Now you are no longer just counting products.
You are managing your inventory.
The Bigger Business Lesson
The goal isn't to have the biggest stockroom.
The goal is to have the right products, in the right quantities, at the right time.
Inventory should support sales—not silently consume all your working capital.
Your sales records can tell you what customers are buying.
Your inventory records can tell you what you have.
Your expense records tell you what the business is spending.
Your cash-flow records tell you what money is actually available.
When you connect these numbers, you start seeing the business differently.
Instead of saying:
“I need to buy more stock.”
You can ask:
“Which stock should I buy?”
“How much should I buy?”
“When should I buy it?”
“How quickly does it normally sell?”
“How much cash will this purchase tie up?”
Those are much stronger business questions.
A Question for You
Look around your business today.
If you had to sell all your current inventory within 30 days, which products would you struggle to sell?
And more importantly:
How much of your business money is currently sitting in those products?
No comments:
Post a Comment