 A successful farm operation will have a smooth operating inventory system. This includes goods on hand, but it can also include the costs involved with storage space, handling, and risk and service. It's a balancing act to zero in on the most efficient and profitable amount of inventory to operate with. John Wodehouse is an extension educator at Penn State University and says inventory is a critical component of the balance sheet because it has a value. So therefore, it is important to count it.