Common Inventory Mistakes Made By Small Scale Retailers That Block Cashflows

Inventory management is one of the most important functions that boost the operational efficiency of businesses in the retail segment. A company that handles its inventory properly leaves all its worries about cashflows behind. However, if your small scale retail business makes the inventory mistakes as discussed in this article, you can risk a deep dent on your cashflows.

This article takes you through the five most common mistakes that small scale retailers make while managing inventory and how a GST no search can help you stay one step ahead in managing your business’s inventory.

What are the Various Ways to Generate Cashflow?

A small scale retailer may generate cash flow in the following three ways:

  1. Cash flow from operations
  2. Cash flow from investments
  3. Cash flow from financing

Out of the three methods of generating cash flow, the one you generate through operational activities shows the financial health of your business. The cashflow your business generates from operations includes everything from order fulfilment and warehousing to inventory management.

What Can Happen if You Take Inventory Management Lightly?

Hershey Company in 1999 lost about $100 million during the peak Halloween season due to problems in inventory led by a software glitch. Its stock instantly fell by about 8%.

In the year 2000, Nike invested $400 million to upgrade its warehousing facility. However, lack of proper inventory management led them to lose $100 million within a matter of days. Its stock plummeted by more than 20 per cent as an impact.

Now think, if poor inventory management can hurt a conglomerate so much, how much can it hurt you?

What are the 5 Worst Inventory Mistakes That Can Block Your Cashflow?

By looking for ways to avoid the following five worst inventory mistakes, you can save your retail business from plunging into oblivion due to decreased cash flow.

  1. Not Automating the Process

As a small scale retailer, you might be leveraged, thus forcing you to cut costs by saving capital for operational activities. Hence, you might consider relying on Excel or any other backdated accounting software for managing your inventory.

However, the little amount you save by not investing in a modern inventory software may expose you to risks beyond your control.

You may either procure the latest point-of-sale software or choose standalone inventory tools, depending on your budget.

To know more about the features that the best inventory management software must have, click here.

  1. Shutting Down the Store to Check Inventory

Many small scale retailers hate doing frequent checks, as checking the inventory is considered as an elaborate and extensive affair. So, they identify a day when they keep the business off and spend only with the merchandise.

It is no brainer that doing so results in an exhausted workforce, lost sales, and an overwhelmed merchandise.

A better approach would be to segregate your products into various clusters and perform cluster-specific audits and inventory checks. Taking a systemic approach would ensure your cash flow remains uninterrupted while you work towards streamlining the inventory processes.

  1. Overstocking Because You Can Afford to

Overstocking is a universal reality. You can dislike it, but cannot ignore it. While at times, overstocking may seem legit, stockpiling the inventory with more than the demand can set you off on a wrong foot.

You need to be exceptional in planning and setting realistic targets. Idle merchandise can be a revenue-guzzler and hit your cashflow harder than anything. So, as a smart retailer, you must analyze the demand and customize the supply accordingly.

  1. Not Having any Plan B

Having a Plan B is more important than the master plan or Plan A for a small scale retailer.

Think about events or circumstances that may be beyond your control, like supplier issues or power failure. By not having a Plan B ready, you remain vulnerable to loss of money.

Hence, do a SWOT analysis of your business processes and keep a back-up plan ready in case of exigencies.

  1. Leaving Taxation to Fate

Ask most small scale retailers the question, ‘what is GST bill?’, and most of them would treat you like an alien.

With the implementation of GST, taxation has undergone a sea-change. Avoiding taxes is no more difficult; it is impossible.

You may stay ahead of the curve by taking the help of a GST accounting software that automatically manages your inventory and make it tax-compliant. Hence, calculating taxes manually and uploading it on the GST portal is no more in vogue; go with the flow and allow the software to take care of your taxes.


The times have changed; so should you. By avoiding the five common inventory mistakes, you can make sure your retail business leaps in the right direction.