Inventory and Cash Flow
What Accountants Should Know to Support Inventory-Led Clients
Thank you to my friends at Settle for writing this article!
If you support CPG or ecommerce brands, you know that inventory can make or break a business's financial health. And while you may not manage day-to-day operations, the quality of inventory data directly impacts your ability to deliver accurate financials, manage cash flow forecasts, and advise clients on working capital.
In this article, we’ll walk through key inventory concepts from an accounting lens, highlight common inventory management pitfalls, and share how you can better support clients who rely heavily on inventory.
Inventory Planning vs. Inventory Management: What’s the Difference?
While your clients may use "inventory planning" and "inventory management" interchangeably, they serve distinct purposes — and both have financial implications.
Inventory Planning involves forecasting demand, coordinating with suppliers, and deciding how much to purchase. When done poorly, this can tie up cash in excess stock or result in missed revenue due to stockouts. For accountants, that means:
Understanding when large inventory investments will hit cash flow
Tracking how quickly inventory turns into revenue
Advising on the financial impact of production or stocking delays
Inventory Management is the execution layer: tracking what’s on hand, what’s selling, and what needs replenishing. This data impacts:
The accuracy of inventory valuation on the balance sheet
How and when COGS is recognized
Cash flow forecasts based on actual inventory movement
Inventory planning drives strategic decisions. Inventory management ensures clean financials. As an accountant, accurate reporting depends on the latter.
Why Accountants Need Strong Inventory Data
Many accounting errors and cash flow issues stem from poor inventory management. Here’s how you can benefit from clean, real-time inventory data:
Validate COGS and margins with accurate stock movement
Forecast working capital by understanding inventory cycles
Support clients through audits with reliable, centralized inventory tracking
When inventory isn’t tracked properly, it leads to inconsistent monthly closes, margin misstatements, and limited visibility into cash needs or vendor obligations.
Several inventory pitfalls can affect financial accuracy. Be aware of them yourself and use them to have value-added conversations with your clients.
Relying on Gut Instincts Instead of Data. Brands that don’t use historical sales or demand trends for planning often end up overstocked or stocked out — leaving you to reconcile skewed margins.
Poor Communication Between Teams. If finance teams lack visibility into inventory planning and movement, it's difficult to time expenses or anticipate capital needs.
Lack of Real-Time Tracking. Without a system that updates inventory as it moves, financials can lag behind actual performance.
Not Leveraging Automation. Manual systems increase risk. When inventory and accounting systems are disconnected, reconciliations are slower and less accurate.
How Accountants Can Add Value to Inventory-Led Clients
You're not just here to close the books. Your insight can help clients:
Spot discrepancies between purchase records, invoices, and physical stock
Model working capital scenarios tied to inventory cycles
Advise on systems that streamline inventory-to-financials workflows
Reduce errors by recommending automation where appropriate
Strong inventory management practices don’t just benefit operators, they make your job easier. When clients adopt systems that integrate inventory and financial data, you spend less time fixing issues and more time offering high-impact advice.
If your clients are struggling with manual inventory systems, suggest solutions, like Settle, that give them real-time visibility – because inventory is more than a cost center. It's the foundation for reliable reporting and better decision-making.
