What is inventory or 'stock'?
Inventory includes any assets that your business purchases or processes to produce its goods and/or services. Inventory is sometimes also called 'stock', 'trading stock' or 'inventory stock'.
What is not considered inventory?
Inventory doesn’t include capital assets or human resources, such as:
- a car that you or your employees use to visit customers
- equipment and tools, such as pliers that you use in your business, unless you buy the pliers to sell them to your customers
- your employees and their training.
Inventory also doesn’t include money, unless you buy and sell it as part of your business, for example, a bank or money exchange business.
Read about the different types of inventory for various business types.
Why is managing inventory important?
Managing inventory is important because it can decrease your costs and increase your sales. Some ways that managing your inventory can decrease costs include:
- lowering your inventory storage costs
- saving money by not ordering inventory that you can’t sell straight away.
Some ways it can increase your sales include:
- being able to sell products when you’re customers want to buy them
- having products your customers want.