Is your inventory a financial blind spot? 

Most small and mid-sized product businesses are chasing growth. Orders come in, sales numbers look promising, and yet the financials don’t quite match up. Margins shrink, cash feels tighter than expected, and advisors are left scratching their heads at month-end. 

More often than not, the missing piece is inventory. It’s easy to think of stock as something that lives in the warehouse or on store shelves, just an operational detail to manage in the background. But inventory is usually the single largest asset an SMB holds, and when it’s tracked poorly, it creates a blind spot that throws off every financial report. 

If a business doesn’t know what’s on its shelves, it will always show up in the financials. Owners end up with distorted margins and cash flow. Accountants and advisors face difficult conversations with clients who expect quick answers but – without real-time and accurate numbers – they’re put in a tough spot and tension builds. Both sides are left reacting to problems that could have been prevented with better-connected data. 

This blog explores why inventory is more than a warehouse issue, how blind spots sneak into financial reporting, and what both SMBs and their advisors can do to close the gap.

When stock problems become money problems 

It’s easy to underestimate inventory. It looks like a warehouse concern: what’s on the shelves, what needs to be reordered, what’s gone out the door. But inventory doesn’t stay put. The moment it’s counted wrong – or not counted at all – the impact moves straight from the warehouse into the balance sheet. 

That’s when COGS (Cost of Goods Sold) no longer reflects reality, and margins appear stronger or weaker than they should. Month-end reporting slows down because numbers don’t reconcile. In some cases, financial software even shows “negative inventory”, as if products were sold without ever existing. 

Each of these blind spots weakens financial clarity. And once trust in the numbers is gone, both business owners and advisors are left working around problems instead of solving them. That’s an issue no spreadsheet can fix. 

How blind spots show up in real life

Inventory blind spots sound abstract until you see how they play out in the businesses we and our partners work with. 

One client was referred to us by an accounting partner who suspected their numbers weren’t adding up. After moving them onto Katana, they discovered $40,000 worth of stock they didn’t know they had. With a live view of inventory, they could see their stock levels clearly for the first time. Their reports had been off for months, their margins distorted, because they didn’t have a clear count of what was sitting in storage. 

We’ve seen the same problem show up in different ways across many SMBs. Sometimes businesses buy more than they can sell, and cash gets locked up in stock that just sits there. Other times, they run out altogether and lose sales they could have won. Shelves are empty, customers are ready to buy, but the product isn’t there. Both are symptoms of the same issue: decisions made on unreliable data. 

Sometimes the impact is visible at an industry level. Cosmetics companies bulked up on raw materials during tariff scares, only to end up stuck with goods they couldn’t move when demand didn’t arrive as expected. Food businesses, on the other hand, doubled their inventory at the right time and sold through. What set them apart was visibility: those who had a clear picture of their inventory could adjust in time; those without were left exposed.  

And while the details change, the pattern repeats across product businesses of every kind. Multi-channel e-commerce operators risk overselling when systems aren’t in sync. Outsourced or hybrid operations lose track of stock moving between partners. Compliance-heavy industries face audit risks when traceability falls short. The blind spots may look different, but the outcome is the same: unreliable numbers and costly decisions. 

This is also where advisors can change the conversation: away from fixing reports and toward helping clients make better decisions in the moment. 

The chain reaction of bad inventory data

The obvious problems are easy to spot: shelves too full, shelves too empty, reports that don’t add up. But blind spots leave a longer trail of damage that isn’t always obvious at first.

One cost is timing. When inventory data lags, so does every decision tied to it. Businesses can’t plan production runs with confidence, and they hesitate to commit to new contracts or big orders because the numbers don’t inspire confidence.

Another is credibility. Investors, banks, and lenders rely on accurate financials to release funding. If inventory throws those reports off, opportunities for financing slip away. In regulated industries, weak inventory data also raises compliance risks – an audit or recall can expose gaps right away.

And then there’s missed foresight. Without a real view of inventory, advisors can’t flag margin pressure or cash flow issues early. By the time the reports catch up, problems are already here.

Blind spots slow a business down in the moment, but they also shape its future: whether it can grow, raise funds, or stay ahead of trouble.

What good looks like: One source of truth

The difference between reacting to problems and preventing them comes down to visibility. When inventory, sales, and accounting live in separate systems – or worse, in spreadsheets – every report is an approximation. Connect them, and suddenly the numbers tell the same story. 

For SMBs, this means cost of goods sold (COGS) updates automatically as orders are fulfilled. Margins reflect reality instead of estimates, and cash flow planning is based on what’s happening in the business today, not last month. Decisions become clearer because the data behind them is consistent and current. That clarity comes from seeing what’s in stock, what’s committed, and what’s on order in one place, which is something we hear businesses point to when they start using Katana’s Inventory screen. 

For advisors, connected data cuts out hours of reconciliation work. Instead, they have the confidence to advise on bigger questions: whether to scale production, adjust purchasing, or rethink pricing strategies. It’s the same set of live numbers, finally visible to both sides at the same time. 

When operations and finance are tied together like this, what happens in production or in the warehouse shows up in the financials right away. Owners and advisors finally see the same picture, which makes decisions about spending, pricing, or production far easier. 

A true source of truth means fewer surprises in the books and more confidence in the decisions that follow. 

The Next Step

Here’s the takeaway: treat inventory as part of finance, not only operations.  
If inventory data isn’t reaching the books quickly and reliably, decisions are being made in the dark. If it does, it creates the kind of clarity that helps everyone. But this isn’t hard to check. 

Take a moment to look at your own setup: where does your inventory data sit, and how fast does it make its way into the books? If the answer is “in spreadsheets” or “weeks later,” that’s a blind spot worth closing.