Stock holding and inflation

If your business processes materials or assembles goods for sale it will need to keep a stock of items to ensure that future sales can be met.

Ideally, stock levels should be kept to a minimum such that hard won cash reserves are not tied up unnecessarily. You will need to manage stocks to cover current production needs and consider supply issues – how long will it take to replace stock.

Innovation can throw a spanner in the best laid stock management plans. You may be left with redundant stock.

When prices are falling – in deflationary times – you will not want to hold excess stocks that could be replaced by lower cost items.

Alternatively, when prices are rising – in inflationary times – the opposite applies. You might benefit from investing in increasing stocks if prices for materials are rising, subject to redundancy issues. For example, if lower cost alternatives enter the market, you may be left with redundant stock or suffer reductions in your profit margins.

Maintaining stock levels is a constant play-off between working capital and profitability. Unfortunately, external factors – currently, inflation and supply delays – are playing havoc with stock management.

If your business is required to hold significant levels of stock and you are unsure how best to maximise the effective use of resources, please call. We can help you consider your options.

Latest Blog
20
Jan

Purpose Of The Spring Statement On 3 March 2026

The Spring Statement on 3 March 2026 is best thought of as an official “state o...

Read More
14
Jan

What the workers rights reform bill means for UK employers

The UK government has confirmed the revised terms of its wide-ranging workers’ ...

Read More
13
Jan

How rising income can cost you valuable tax allowances and benefits

For many taxpayers, an increase in income feels like a straightforward positive. High...

Read More
08
Jan

HMRC names finalists in drive to close the tax gap

In December 2025, HM Revenue and Customs announced the finalists in a competition aim...

Read More