When it comes to organizations’ finances, some years are better than others. It’s no secret that for many in the private and public sectors, the last few years have been on the lean side.

It requires creativity for a company or government department to tighten its belt without cutting its services or quality. With fewer goods being sold, companies earn less money and the government takes in less in sales and payroll taxes.

How can these organizations effectively cut costs and maintain their overall strength? One way is with inventory management software. Inventory management software is an automated system for keeping track of inventory levels, product shipping and sales.

Two typical inventory-management problems that can hurt organizations’ financial health are having too much or too little inventory. Many times, a company or government department purchases products or parts in bulk to ensure they have enough on hand to meet demand the moment an order comes through. They also may think the discount they get by buying a large number of products or parts will offset any potential risks.

However, this strategy leaves them vulnerable to product spoilage and obsolescence. An overstock of products or parts also prevents the capital that was spent on them from being used in more productive ways. Organizations have a finite amount of capital to work with, so it’s important that they spend their money as effectively as possible.

Being understocked on products is what most organizations try to avoid. Not having enough inventory on hand causes manufacturing delays, and it can drive customers away.

To find a balance between an overstock and an understock of products, many groups turn to inventory management software. Using barcode scanners to receive, track and sell products, organizations can know how much inventory they have at any given time. They can also accurately predict different times of year when they will need more or less inventory and automatically order more products when they reach a certain low level.

Even when the economy recovers, companies and government departments can continue to take advantage of inventory management software’s cost-cutting solutions.

Robert Lockard is a copywriter for Fishbowl Inventory.