When it comes to inventory, SMB owners constantly struggle with figuring out how much is enough.
Carry too little, and you risk missed sales, delayed jobs, and frustrated customers.
Carry too much, and you tie up cash that could be used to run—and even grow—your business.
You may have heard of different strategies to strike that coveted balance between too much and too little. But which approach “wins” in the just-in-case vs. just-in-time inventory battle?
Below, we explain both strategies so you can make smarter inventory management decisions, including determining how much stock you really need, and how to invest in inventory without putting unnecessary pressure on your cash flow.
What Is Inventory Management—and Why Does It Matter for SMBs?
What counts as “inventory” depends on your business. For example:
- If you’re a retailer, your inventory is likely products sitting on shelves or in a warehouse.
- If you’re a landscaping company, inventory may include plants, mulch, soil, fertilizer, and other materials needed to complete jobs.
- If you’re a catering business, inventory may be ingredients, beverages, disposable serving supplies, and other items needed to prepare and serve food.
Whatever you’re keeping on hand, the goal is the same for all SMB owners: to have the right items, in the right amounts, at the right time.
Here’s why that matters:
- If you don’t have what customers want: You may lose sales. One survey shows that when retail customers couldn’t find the products they wanted, almost 40% left the store to look for alternatives, while another 10% abandoned the purchase altogether.
- If you buy more than you need: You tie up cash in products that haven’t generated revenue yet—even as much as 30% of working capital.
SMB owners already have plenty on their plates, so finding the right balance between meeting customer demands and keeping cash available for other business needs isn’t always easy.
That’s where good inventory management comes in.
Put simply, inventory management is the process of ordering, storing, tracking, and replenishing the products, materials and supplies your business needs.
When done right, inventory management can help your small business:
- Avoid unnecessary purchases by basing orders on actual demand.
- Prevent stock shortages by identifying products and supplies that need to be replenished before they run out.
- Make better use of your cash by avoiding unnecessary money tied up in slow-moving inventory.
- Prepare for growth opportunities by understanding when it makes sense to increase your inventory.
So, how do you decide when to keep extra inventory on hand—and when not to?
Two common approaches can help you find the right balance.
Just-in-Case Inventory: Keeping a Safety Buffer
This approach involves keeping additional stock on hand so your SMB is always prepared for the unexpected.
Basically, “JIC thinking” focuses on creating a safety buffer that gives your small business some breathing room if things don’t go according to plan—like if there’s a sudden spike in demand, or a delayed supplier shipment, or an unexpected equipment failure.
The logic is right there in the name: just in case.
For some SMBs, that extra stock can lead to valuable benefits.
Prevent Lost Sales
Customers expect products and services to be available when they need them.
A toy store might lose sales because a best-selling product isn’t available when customers are ready to buy. Similarly, an auto repair shop may have to delay a job because a required car part isn’t on hand.
Keeping a reasonable “safety stock” of high-demand or essential items can help prevent these situations.
That way, instead of asking customers to wait, you’re ready to serve them at the exact moment they’re ready to buy.
Prepare for Seasonal Demand
Some SMBs know when demand is likely to increase (this is where forecasting can help).
If your business experiences predictable seasonal peaks, stockpiling inventory ahead of time can help you capture more sales at those specific times of year.
For example:
- A gift shop may stock up on popular items ahead of the holiday shopping season.
- A snow removal company might stock up on salt, ice melt, and other winter supplies before the first snow fall.
- A youth clothing boutique may increase inventory of back-to-school clothing, shoes, and accessories ahead of the new school season.
In other words, the JIC inventory approach can help ensure you’re prepared for periods when you reasonably expect demand to increase.
Take Advantage of Supplier Opportunities
Sometimes, buying more inventory can create opportunities to decrease your costs.
For example, a commercial cleaning company that goes through large quantities of cleaning solutions, paper products, and other supplies may order in bulk.
If the supplier offers a high-volume discount or reduced shipping costs, the SMB owner gets the added benefit of lower inventory costs while also reducing the risk of running out of stock.
Just-in-Time Inventory: Staying Lean
This inventory approach is the exact opposite to JIC thinking.
Instead of keeping large amounts of inventory on hand, just-in-time (JIT) inventory involves ordering or replenishing stock closer to the time when you actually need it.
Ultimately, the goal is to keep your inventory “lean” so you’re not tying up cash in products that may sit on your shelves for weeks—or worse yet, months.
Here are some reasons why SMBs may prefer this inventory approach.
Protect Cash Flow
The more inventory you hold, the less cash you have for other areas of your business as you wait for products to be sold.
Conversely, by reducing stock, you can free up capital to put toward things like marketing, networking, hiring, and scaling your SMB.
For example, a gym that sells protein bars, drinks, supplements, and fitness accessories could reduce the amount of slow-moving merchandise it keeps on hand and use that cash for new equipment.
The result: your money is working for your business, rather than sitting on a shelf.
Reduce Inventory Waste
Carrying too much inventory creates the risk that products won’t sell before they become outdated, seasonal, expired, or otherwise difficult to move.
This can be especially important for SMBs selling or using products that have a limited shelf life or a narrow selling window.
For example, an electronics retailer that orders too many smartphones or laptops might be left with excess inventory when newer models are released—making older products harder to sell.
Similarly, a florist that orders too many fresh flowers might be left with inventory that wilts before it can be sold.
Ultimately, the JIT approach helps SMBs make smarter use of their cash and inventory by aligning purchases more closely with when products are actually needed.
Improve Purchasing Discipline
JIT inventory can also encourage SMB owners to take a more deliberate and frequent look at what they’re buying, when they’re buying it, and why.
Rather than automatically replenishing stock based on habit or assumptions, a lean inventory approach requires you to pay closer attention to things like customer demand, sales trends, inventory turnover, and purchasing patterns.
The result? Over time, SMB owners can make more informed purchasing decisions, better align inventory with actual demand, and make more effective use of their cash.
Finding the Right Inventory Balance for Your SMB
Now that you understand both JIC and JIT inventory approaches, you’re probably wondering: which one is best for your small business?
The answer is: it’s rarely an either-or decision.
In fact, the most effective inventory management strategies often combine both JIC and JIT thinking, applying each where it makes the most sense.
Achieving the right balance depends on a variety of factors, including the item itself, how reliably your suppliers deliver, customer expectations, and where you want to take your business.
Here are a few things to take into consideration as you develop and refine your own inventory approach.
1. Identify Your Fastest-Moving Inventory
This step involves figuring out where having extra inventory adds value to your SMB.
Start by noting your best-selling products, frequently used materials or supplies, and any other product that regularly runs out.
If these items consistently generate revenue, or they’re essential to fulfilling customer orders, you may want to keep a larger supply on hand at all times.
However, vendor reliability plays a factor in decision-making as well.
It’s better to apply a just-in-case approach if your supplier has long lead times or experiences regular delays. Conversely, if they consistently deliver on time, you may be alright operating with a leaner, just-in-time inventory approach.
2. Identify Slow-Moving or Excess Inventory
Next, take a closer look at the inventory and materials that aren’t moving. Ask yourself:
- Are certain products sitting on shelves or in storage for months, taking up valuable space?
- Have you noticed declining demand for certain items?
- Are there inventory purchases you made in the past that are now difficult to justify?
- Could that cash be put to better use elsewhere in your business?
Depending on what you discover, you might decide to offer discounts or promotions to move these items, while reducing or pausing future purchases until existing inventory has been sold or used.
Ultimately, your goal should be to understand why inventory is sitting there—and use those insights to determine what you should keep, decrease, or stop buying altogether.
3. Consider the Repercussions of Being Out of Stock
What might happen if you don’t have something customers need? Consider your:
- Inventory turnover: How quickly inventory is sold or used and then replaced.
- Stockout frequency: How often you run out of products or supplies before you can replenish them.
Next, do an if/then analysis where you consider the potential impact of each stockout:
- Are customers likely to wait until the item is available again—or will they go somewhere else?
- Could being out of stock delay a customer’s project and cause them to cancel an order?
- Could a stockout affect a customer’s decision to ever do business with you again?
You’ll realize that not every stockout has the same consequences.
For example, running out of a slow-moving product that customers can easily buy elsewhere may have minor repercussions. But running out of a best-selling product could ultimately drive customers to your biggest competitor.
That’s why some inventory deserves more protection than others—and may warrant more of a just-in-case approach.
4. Look for Opportunities to Buy Strategically
In some situations, buying more inventory makes good business sense.
For example, if seasonal demand is predictable and a supplier offers a bulk discount on one of your best-selling products just before the holidays, buying more upfront could help you reduce your per-unit costs while ensuring you have enough stock to meet demand.
But not all opportunities are so clear-cut.
For example, a pet grooming business may be offered a bulk discount on shampoos and other grooming supplies. But what if the business doesn’t use those products quickly enough to justify the larger purchase? Meanwhile, could that cash be put to better use elsewhere in the business?
The key is to consider whether the potential savings or additional revenue from carrying more stock outweigh the costs of storing it and tying up your cash.
Overall, the better you understand what’s happening with your inventory, the less you need to rely on guesswork—and the more confidently you can decide what to buy, when to buy it, and how much to keep on hand.
Investing in Inventory Without Straining Your Cash Flow
Let’s say your busiest season is just weeks away. Or your supplier is offering a bulk discount. Or maybe you have a product that’s growing in popularity, and you want to add extra inventory to keep up with demand.
The problem?
If you’re like many SMB owners, you simply may not have the cash to take advantage of these limited-time opportunities—especially if most of your available working capital is going toward day-to-day expenses.
Meanwhile, waiting until you have enough money could mean missing the opportunity altogether.
While some SMB owners may turn to banks, traditional financing isn’t generally well-suited to these situations. Securing a loan can take weeks if not months—and that’s assuming you meet the stringent lending requirements.
Fortunately, alternative financing provides a more viable option for small businesses, offering faster access to capital when timing is of the essence.
For example, through Bitty, you can receive funding in as little as 24 hours of applying through:
- Revenue-based financing (RBF), which provides a lump sum that you repay through a percentage of your future revenue, so your repayment amounts fluctuate alongside your sales.
- Fixed-fee business loans, which offer a set borrowing cost and predictable repayment structure, which makes it easier to plan your cash flow.
Ultimately, alternative financing helps you take advantage of opportunities as they happen, enabling you to buy the right inventory at the right time.
Give Your SMB Inventory Strategy a Boost with Bitty
There’s no magic formula approach for managing your inventory. But by combining just-in-case and just-in-time thinking, you can make smarter decisions about what to buy, when to buy it, and how much to keep on hand.
And when the right inventory opportunity to maximize returns comes along but your cash flow isn’t quite there, Bitty can help.
Our flexible financing solutions give SMB owners fast, easy-to-access working capital when they need it, empowering you to build your stock without putting unnecessary pressure on your day-to-day finances.
Ready to put your inventory plans into action? Contact Bitty today to learn how to access the financing you need to keep your business moving.
