We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is the Connection between Sales and Inventory Management?

By A. Preble
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

The relationship between sales and inventory management is important because a business owner can only know what inventory he has if he knows what he's purchased and what he's sold. Proper recording of sales lets the business owner know when he's running low on an item in his inventory, whether he should restock the item and, if so, how much to purchase. Proper recordkeeping each time a sale is made can ease this process. It also can help the business owner keep track of his profitability and make decisions about the future of the business.

Back-end inventory management involves accounting for purchases of raw materials that will eventually be turned into goods for sale, and items purchased for immediate resale. Raw materials are transferred into an intermediate work-in-progress account while being used for manufacture. Then, items are transferred into the finished goods category and sold. Pre-fabricated items are immediately placed into the appropriate inventory account after being received and checked in. From here, sales and inventory management are handled simultaneously as income is recorded and the item is removed from finished goods.

When a sales associate records a transaction, inventory balances are once again adjusted. The only other circumstances in which a product is removed from inventory at the point of sale are damage or theft. To properly allocate income and loss, the connection between sales and inventory management must be strong, and associates must adhere to any inventory requirements regarding sales, damages and theft.

There is only one chance for a company — especially a large one with many items for sale — to record point-of-sale (POS) transactions and adjust inventory levels. Associates can't be expected to remember each transaction, so a reliable system is essential. Most POS systems are integrated with an inventory tracking system, and bar codes ensure each product is properly accounted for. As long as each item gets properly scanned or recorded, inventory levels will be accurately maintained. Damaged items must be manually removed from inventory, as must items lost through known theft.

Though there are other ways of adjusting inventory post-sale, the best method is to create an easy-to-follow POS procedure and to foster a strong understanding between sales associates and inventory management associates. While a separation of duties is important for maintaining a checks-and-balances system, each department must understand all related procedures at a basic level, if not higher. Both sales and inventory management departments need to work together to ensure that items are being properly accounted for. Inaccurate sales figures and inventory levels can lead to inflated earnings statements and can ultimately affect the company's health and longevity.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.