Inventory vs Stock: What Are the Differences?

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inventory vs stock

Did you know that the average warehouse is more than 180,000 square feet in size in the United States of America? Managing your inventory and stock is a tricky business when you’re managing an e-commerce store that is growing in size. One of the best things that you can do to make organizing a bit easier is to learn the differences between inventory vs. stock.

Many people make the mistake of using the words “stock” and “inventory” for the same purposes when in reality they have very different meanings. Luckily, you’re in the right spot to learn all about stock and inventory from this helpful inventory guide.

Keep reading to learn all of the inventory tips that you’ll need to know to make the most of your e-commerce business today!

What Is Stock?

Stock is quite different from inventory because it refers to goods that are in their final form of production. These products are ready to be sold to customers and shipped out today so that the end user can start enjoying the benefits that they provide.

The unfinished items or raw materials in your e-commerce business’s warehouse could also fall into the stock category. If you plan on selling these raw materials to other businesses then they’d fall under the “stock” category if you refer to a stock guide.

What Is Inventory?

Inventory is different from stock since the stock is a subgrouping of the inventory in your warehouse. Your inventory is a combination of all of the completed goods in your warehouse in addition to all of the raw materials that you’ll use to create more goods. The products that are still in the process of getting manufactured also fall into your business’s inventory.

It’s important to understand your inventory because you’ll need to account for everything that you own when tax season rolls around. You’ll also find it helpful to learn about the four different types of inventory.

1. Raw Materials

One of the most common categories of inventory is raw materials that you’re storing in your warehouse. These are all of the simple or basic components that you’re using to finish the production of your products. If you’re using these raw materials to create goods that an end user can gain value from then they fall under your inventory category.

If you have plans to sell your raw materials to other businesses for their production processes then they fall under the category of stock for your business. Make sure you use this small business inventory app to have an easier time tracking all of the things that you have in your warehouse at any given time.

2. Work-in-Process

Work-in-process materials are also important to remember when you’re learning more about what is inventory and the differences between inventory vs. stock. This category is dedicated to products that aren’t raw materials anymore but aren’t finished and ready for the end user. They exist in a realm that is between raw materials and finished goods.

If you’re handling the accounting for your e-commerce business then you’ll want to list these work-in-process goods as assets for your company. Having this knowledge will make tax season much easier since you’ll know how to categorize the items in your warehouse.

3. Completed Goods

Completed goods are the products that your business creates and sells. You’ll use the raw materials in your inventory to put together these goods prior to listing them and selling them to your happy customers. If you’re planning on taking a look at what you have in your inventory then you’ll want to make sure that any completed goods fall under the inventory category.

It’s much easier to know the value of the good that you have ready for sale when you have an accurate number of completed goods sitting in your warehouse. This is a huge benefit when it comes to your business accounting department as well as your tax filing processes.

4. MRO

An often overlooked aspect of your business’s inventory is MRO. MRO stands for maintenance, repair, and operations at your business. It reflects the tools that your business uses to manufacture goods that you’ll sell to your customers in the future. If you’re handling bookkeeping in your e-commerce business then you’ll want to categorize these tools as inventory.

Benefits of Keeping Inventory

Now that you know more about the difference between inventory vs. stock, it’s important to learn the benefits of keeping an accurate inventory for your e-commerce business. It’s important to stay on top of inventory and stock if you have big plans for your new business.

Arguably the most important benefit that comes with an accurate picture of your inventory is order fulfillment. You’ll have a hard time keeping customers loyal if you’re unable to fill their orders in an accurate and timely manner. Having an item that is out of stock is rough, but shipping the wrong item is a failure that could prove fatal for your business.

You’ll also find that your ordering and operations run much smoother when you have an accurate idea of your business’s inventory. If you don’t know which products are sitting in your warehouse then it’s impossible to know when to start making more. You’ll find yourself overstocked with goods if you don’t keep track of what you have in your inventory.

Your customers will also love working with you if you use these inventory tips and maintain accuracy. All it takes is shipping the wrong item or sending a damaged one to turn an otherwise happy customer away to a competitor.

Now You Know the Difference Between Inventory vs. Stock

Knowing the difference between inventory vs. stock is a big deal if you have your sights set on creating a successful e-commerce business. Stock is the number of goods that you have sitting in your warehouse that is ready to be sold and shipped out ASAP. Your inventory is all of the goods in the process of getting manufactured and the raw materials used, as well as your stock.

For more helpful and informative articles on a wide range of topics, check out the rest of our blog today!

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