5 Ways to Reduce Inventory Holding Costs as a Small Business Owner

They say that many small businesses permanently close at some point within their first few years of operating. One of the reasons for this is the continuous expenses businesses require in order to keep up and running. Unfortunately, these expenses don’t go away, even if the business isn’t profitable or making sales at all.

Inventory management

Inventory holdings costs are one thing that may burden small business owners. So, how can we reduce these costs and, in turn, help make running a small business more affordable so that business owners can be more successful? We have some useful tips for you.

1. Don’t Overstock on Items

It’s easier said than done at times, but it’s critical to make sure you aren’t overstocking on items. If you aren’t selling a particular item very often, it makes little sense to keep ordering it or to order large quantities of said item. At some point, you might find yourself hoarding inventory, which is inefficient and costly.

2. Know When it’s Time to Reorder

In the beginning, it’s hard to know when you should reorder items. Taking inventory regularly can help you get familiar with the best reorder time for each item. The items you order might have a different reorder time, and because of that, sometimes you’ll find yourself making several, frequent reorders.

When going to reorder items, consider how much stock you currently have, how much of that item you’re selling, how long it typically takes for your order to arrive, and how long the shelf life is for said item once you receive it (i.e., does it expire?).

3. Refrain from Ordering More Just Because it’s Cheaper

As a business owner, it can be tempting to buy more just because the supplier offers a wholesale price or the-more-you-buy-the-more-you-save deal. Yeah, you’re going to spend more money overall if you buy in bulk, but you know you’re saving a lot more money per item and have the potential to make more profit.

But unless your business is successful, and you’re selling a lot of a certain item, it’s often not good to do the latter. Not only will you have a surplus of stock, but you will be seeing the money in your pocket dwindle away quicker.

4. Recognize Your Deadstock, and Get Rid of It

Deadstock are the items you have in inventory that just don’t seem to be selling. Items that customers just don’t want or items that are out of season are examples of deadstock. Become aware of what your deadstock is, and find ways to get rid of it through bundling items, doing a sale, returning it to your supplier, or donating it.

5. Opt for Inventory Management Software

Sometimes technology can be a godsend for small business owners. Just in time inventory management software can offer a great solution for business owners wanting to cut inventory holding costs. This way, you can get the items you need as you actually need them, saving money and improving inventory space.


As a small business owner, you don’t have to let inventory holding costs get you down. Luckily, there are ways you can save money on these pesky expenses. Refraining from overstocking and ordering large quantities just because it’s cheaper, knowing when to order, getting rid of deadstock, and using software can help a lot.


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