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How Much Inventory Does Your Company Need? Several factors go into deciding how much inventory you need to stock. We take a look at the essential elements to consider.

By Mike Sowinski

Opinions expressed by Entrepreneur contributors are their own.

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Q: What's the right level of inventory for my business?

A: In my book, there's only one right answer to this question: You always want enough stock on hand so that customers can buy whatever they want, whenever they want. If you're sold out, then you're turning away people who are primed to buy--and that's worse than having no customers at all. Compounding this situation is the fact that "sold out" switches your company into crisis mode, in which you're likely to pay a premium to vendors for a quick turnaround of new inventory, on top of vastly more expensive airfreight charges.

Follow the Numbers
Tracking inventory on a regular basis does more than help you zero in on the ideal number of goods, parts and supplies to maintain--it can also uncover theft and fraud. Dishonest bookkeepers have been known to hide embezzlements in rarely audited inventory numbers. And thanks to a count I conducted at an A/V installation shop, I caught an employee who was stealing equipment--including a $75,000 TV--and selling it on his own.

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