Why Excel for inventory management is never a good idea

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If your business is reliant upon Excel spreadsheet templates to help control inventory, then the chances are that you are operating well below optimal efficiency and profitability yet believing you are making progress.

The reliance on Excel as an inventory management solution is driven in part by two massively misleading components:

  1. Excel spreadsheets are reliable, simple to use and most importantly of all – cheap.
  2. Smart, sophisticated and powerful inventory management software is notoriously expensive and unwarranted for a small or even mid-sized business.

We aim to challenge these inaccurate inventory management pre-conceptions in a bid to help small and mid-sized business avoid falling into the trap of making false progress and in turn hampering their productivity and profitability.

Misconception #1 – Excel spreadsheets save you time, save you money and put your bottom line first

While it may be true that the face value of utilising Excel as your inventory control solution is irresistibly cheap, the truth is far from it. When it comes to implementing an inventory management system it never pays to be shortsighted.

Inventory is classified as one of the most important assets of a business and therefore exerts major influence on practically every aspect of operations – from the production line to the boardroom. Ensuring that inventory is properly managed and that inventory levels are always aligned with the fluctuations in supply and demand is critical if a business has any hope of succeeding an increasingly competitive, international marketplace.

Global is the new local

If you think your business is immune to international competition because you source and sell domestically, think again. At any moment a new competitor could emerge on your radar and because they source from international suppliers with more competitive pricing, or simply with a currency exchange advantage, you could fast be backed into a corner. The harsh reality is that in today’s global economy, no business is immune from foreign influences.


With a spreadsheet-driven inventory management system there is no way to ensure that data on inventory levels, pending purchase orders, sales and distribution of goods are current with the real-time situation on the ground.

Forecasting is at best an educated guessing game and replenishment orders are driven by out of date data that inevitably leads to the business holding on to too much inventory (over stock) or too little (stock out).

Over stocked

Overstock is enough to cripple a cash flow reliant business because by bringing in and holding more inventory than is necessary the business effectively strangles its cash-flow. The more inventory there is sitting on shelves or in warehouses the less working capital there is to direct to funding business growth in other areas.

Furthermore, overstock sends operating costs soaring as an army of seen and unseen costs steadily marches across the balance sheet slowly eroding the bottom line. Labor, storage and utilities costs, higher insurance and security costs as well as damage to goods, theft, fraud and obsolescence all compound as a result of a business holding more stock than is required.

Stock outs

Stock outs are an equally detrimental menace to business’s operating inefficient inventory control systems. Not having enough inventory to meet demand leads to lost revenue as a result of missed sales. However, far more harmful is the effect to the business’s reputation and customer base. With plenty of viable alternatives, customers in a thriving market will very quickly drop a business unable to deliver on its promises and move over to a competitor who can.

Win short term – lose long term

Unless a business has the capacity to track, trace and account for every item of inventory moving through its supply chain in real-time, it will suffer inventory level inaccuracies and make its operations more prone to error through inefficiency and human error. When it comes to controlling your inventory, a short-term win by cost savings up front more often than not equates to a long-term loss as the business drifts into inefficiency, error and unbalanced inventory levels.

Misconception # 2 – Smart, sophisticated and powerful inventory management software is expensive

Assuming that a powerful, integrated inventory management software solution entails a sizeable outlay of working capital is often what drives business owners to adopt ‘cheaper’ alternatives like Excel spreadsheets.

While these assumptions may have been accurate a decade ago, this is no longer the case. Software-as-a-Service cloud-based inventory management solutions – like the one offered by Unleashed Software – have made powerful inventory management accessible and affordable to small businesses.

The playing field has been leveled by innovating the way in which effective inventory management software can be deployed and even customized for businesses across a wide range of industries – regardless of size and complexity.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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