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New York, NY—Many small businesses have excess cash tied up in inventory, instead of using it for operating capital. While few business owners (including jewelers) purposely say, “I want to tie my money up with inventory,” after a while it just happens organically.

A recent article in American Express Open’s Small Business Insights says the typical reasons why small businesses amass too much inventory are:

• They worry about losing a sale if the item isn’t in stock.
• They buy too much because volume discounts seem like a good way to save money.
• They keep more on hand than they need because the supplier is unreliable.
• They don’t plan for, or measure, inventory levels and sell-through rates.

Sound familiar? It’s like going to a warehouse club: sure it’s a great price, but do you really need 10 pounds of peanut butter?

To combat the temptation to become an inventory hoarder, the article suggests literally visualizing your inventory as cash. Instead of [pallets or] trays of merchandise, envision trays of cash that you can’t use. Train yourself to think about inventory management as “just in time” rather than “just in case.”

Not all products in a store turn at the same rate, so calculate turn rates by product family, suggests the article, and see how your rates stack up against industry standards. Periodically review your stock replenishment programs with suppliers, and use current technology to make sure you’re getting the most accurate and timely inventory reports possible. Finally, measure customer service as well as inventory levels to ensure a good balance: you don’t need excess inventory, but you also can’t sell what you don’t have.

At the Centurion Scottsdale 2013 show, jewelers John Jackson of Maryland-based Smyth Jewelers and Kim Murphy of Pennsylvania-based Murphy Jewelers presented a 40-minute panel on effective financial and inventory management for luxury jewelers, moderated by Don Grieg. Their full presentation is available to view on video here, or you can also read a recap here.

Kim Murphy and John Jackson sharing their budget strategies during Centurion Scottsdale 2013.

Read the American Express article here.