592 – Smarter Inventory, Better Cash Flow

Inventory is one of the most misunderstood and cash-intensive assets in a small business, and managing it strategically can dramatically improve cash flow, reduce risk, and support sustainable growth.

Show Notes Page: https://www.thehowofbusiness.com/592-smarter-inventory-better-cash/

Inventory is often treated as an operational detail, but for many small businesses it is one of the biggest drivers of cash flow strain and hidden risk. In this episode, Henry Lopez reframes inventory for what it really is - cash tied up on your shelves - and explains why poor inventory decisions can quietly suffocate profitability.

Henry walks through the most common inventory challenges small business owners face, including trapped working capital, spoilage and obsolescence, shrinkage, unpredictable demand, and the temptation of bulk-purchase discounts that often do more harm than good. He explains why inventory typically lives on the balance sheet rather than the P&L (Profit & Loss Statement), and how that accounting reality can mask its true impact on business performance.

On this episode of The How of Business podcast Henry also explores the origins of Just-In-Time inventory, its roots in Toyota's post-war production system, and how small businesses can responsibly apply lean inventory principles today, especially now that most supply chains have stabilized after COVID disruptions.

Finally, Henry outlines the core components of an effective inventory operating system, from software and supplier management to a short list of essential KPIs that help business owners stay in control.

The key takeaway: inventory decisions are cash decisions and managing them well is critical to long-term business health and growth.

Inventory management is not just about what you sell or use, it's how you invest your cash, manage risk, and determine whether your business can grow and survive.

This episode is hosted by Henry Lopez. The How of Business podcast focuses on helping you start, run, grow and exit your small business. The How of Business is a top-rated podcast for small business owners and entrepreneurs. Find the best podcast, small business coaching, resources and trusted service partners for small business owners and entrepreneurs at our website https://TheHowOfBusiness.com