How to: Manage Inventory If you don't know what's in stock, there could be trouble in store.

Ruth Kelsey's method of tracking inventory for her giftbasket business, Brittany's Balloons and Gifts, used to beinformal--to say the least. "I was going by sight,"recalls the Lithonia, Georgia, entrepreneur. "Basically, Istored everything in my den and garage, and every so often I wouldcount it all."

As Kelsey's business grew and expanded to include partydecorations, her inventory system became inadequate. "I wouldthink I had 20 baskets left, then I'd go to fill several ordersand find I had only 14," she says. "That would put me ina pinch, especially in my busy seasons." Kelsey is in theprocess of computerizing her inventory, which she expects to giveher a more accurate method of tracking.

Inventory can make up 50 percent or more of a business'scurrent assets, and poor inventory tracking is a major factor inbusiness failure. "You want to make the best use of yourcapital," says Bruce Cohen, managing partner of the Albany,New York, office of accounting firm Coopers & Lybrand LLP.