7 Tips for Small Business Inventory Management
If you already own or are gearing up to start a small business, one thing you have to pay extra attention to is inventory management. For small businesses, inventory management is one of the most integral parts of the entire process. It helps you evaluate how well your business is doing and whether it’s on track for success.
With these points in mind, you may be wondering how to keep inventory for a small business. While it sounds simple enough, a lot can go wrong or become complicated if you aren’t careful.
Thankfully, we can help you ensure your small business inventory management endeavors are successful and smooth at all times. How do you plan to manage stock at your growing enterprise? What’s the best way to do inventory for a small business? Whatever you have in mind, these seven small business inventory management tips will help you stay on the right track for growth and success.
Why Small Business Inventory Management Is So Important
Throughout its lifespan, how would you say your company’s inventory management has been going? Are your products available when you need them? Have you lost business because certain items were out of stock during periods of high demand? Have you lost money because you ordered more merchandise than there was a demand for?
Whatever issues you’ve faced with your small business, you surely know that proper inventory management is imperative to your company’s success. It ensures that customers are happy, business is booming and stable growth is on the horizon.
Managing inventory for a small business is the process of ensuring the right products are in the right quantity for sale at the right time. In other words, supply adequately meets demand so there’s never too little or too much. When you manage your inventory the right way, you can keep track of your inventory to ensure product sales run smoothly at all times, helping your business grow.
Why Inventory Management Is Even More Important As Small Businesses Go Digital
Businesses that sell goods have always used inventory management, whether using pen and paper or a spreadsheet. In the information age, inventory management is more complex and all the more critical.
Small businesses are increasingly turning to e-commerce, allowing them to sell to customers worldwide, or at least beyond the radius of their physical store. It also lets brands sell 24 hours a day, regardless of business hours. This process can make inventory needs more unpredictable. With customers across the country buying at all times of day, more factors are affecting supply and demand. Therefore, having a way to predict changes to sales velocity and replenish before a rush becomes even more critical.
Once a business starts handling e-commerce, growing into an omnichannel retailer is the next step. Successful, growth-minded companies recognize the need to list their products wherever shoppers want to buy so they can capture new business across the internet. As they do so, they might expand beyond their website’s shopping cart platform and enter new e-commerce marketplaces, such as Amazon, Walmart, Wish and more.
Adding multiple sales channels introduces more complexity to your inventory system. After all, sales on one channel may affect the quantity you have available to promise customers on another platform. Managing your inventory as a single group may mean promising the same goods to customers who purchased on different websites. This concern, known as overselling, makes customers dissatisfied and can get a retailer banned from certain marketplaces. Integrated inventory management software prevents overselling by syncing inventory data across your sales channels, storing it in a centralized database.
7 Tips for Small Business Inventory Management You Can Really Use
Once you understand why keeping up with inventory is so important, how do you do it? After you’ve done it, how do you keep it up? It might seem like a lot of guesswork to know what the market will call for and how to deliver — and market research can only take you so far.
Fortunately for you, we can offer an answer — stick with what you already know while adding a few fail-proof tools to your repertoire. This solution means knowing how many products your business should have in inventory at all times, or what you have physically in your warehouse or stockroom, and using strategies to ensure you’re always on top of inventory management.
Our seven tips for how to keep an inventory for a small business can be part of your toolbox and management strategies.
1. Invest in Good Inventory Management Software
Inventory management software is one of the best ways to improve how you manage your small business inventory. Many software options can help small businesses digitize their inventory in a way that helps them keep track of it, forecast demand and analyze inventory from various devices like your smartphone, tablet or computer.
Finale Inventory offers an excellent cloud inventory management software system perfect for small and growing businesses. It’s easy to understand, adaptable and affordable. Our software supports various inventory management applications for warehouse management and multi-channel e-commerce inventory, giving you many options to best use your management system. Finale Inventory also supports barcoding, serial number tracking, QuickBooks, multi-location inventory and much more. Learn more about the software system and all it has to offer.
2. Identify Any Low-Turn Stock
Low-turn stock is merchandise that hasn’t sold in the last six to 12 months. If that’s the case, chances are it’s now time to stop stocking them. Be aware some items may have a higher sales velocity at different times of the year — think Halloween costumes in October, bathing suits and shorts in spring and summer — so be discerning about what you do and don’t restock.
When you’ve identified which products have a low sales velocity regardless of the season, you can stop stocking them. Of course, you have to be strategic about getting rid of the remaining product or products in question, and there are many creative ways to do so. For one, you can create a special discount or promotion to move the products off the shelves. This trick helps your business immensely as excess stock wastes time, space and capital.
To keep track of how long a certain product has been in stock, your inventory management software should keep the listing up to date in real time. If you use dates as your batch or lot number, you can instantly view how long certain items have been in your facility. Anything with an overly long stay will eventually have to go!
3. Use the FIFO Approach
FIFO stands for “first in, first out.” When it comes to small business inventory management, products should sell in the same chronological order you purchased or created them. Therefore, what comes in first must go out first, and so on. The FIFO approach can also come in handy for many inventory-based accounting methods and can have tax advantages in certain situations.
This rule is useful for all businesses and their products, and it’s especially beneficial for perishable goods like plants, makeup, food and organic items. A great way to actively use the FIFO approach is to model your stockroom or warehouse after it. Older products go in the front and new items go toward the back. This way, the first in is first out all the time.
4. Always Track Your Stock Levels
Here’s another job for business inventory software. We mention it again because it’s truly that important. You need to have a strong system in place to keep track of your stock levels so you know what to stop ordering, what needs to ship first and what’s a new arrival. Many small businesses prioritize their more expensive products using this approach as these are likely in higher demand and cost the business the most money.
Finale Inventory’s small business inventory management software is perfect for this job. It uses real-time data from your online sales and sales orders to decrement stock from your quantity available to promise. When you order replenishment stock, it takes the information from your purchase order to add new inventory to your availability automatically. Whenever you process inbound or outbound shipments, Finale Inventory automatically updates your quantity on hand.
5. Audit Your Stock
To ensure everything is as up-to-date as possible, you don’t only want to rely on your business inventory management software the same way you wouldn’t only rely on yourself.
This is to say that even with the best software in the business, you should also count your inventory yourself to make sure all the numbers add up and match up. Computers can make errors just like humans, so why not double-check for optimal safety?
There are different ways to audit your stock — some businesses audit their stock annually. Others conduct a year-end physical inventory. With physical stock takes, a team goes through to count stock, recount it and spot-check it to ensure everything adds up correctly. However you do it, make sure the job gets done.
We can assist you however you double-check your stock records. With helpful stock history reports, you can check who made changes and when to get to the bottom of any discrepancies. Our mobile barcode app users can also use their scanners for physical stock takes. It’s faster and more accurate than counting with your pointer finger or doing the math in your head.
6. Consider Hiring a Stock Controller
Stock control shows the amount of inventory your small business holds at any time and contains everything from raw materials to finished products. If you have a business that creates goods with a lot of different parts, it might be helpful to hire a stock controller in addition to your small business inventory management software. Your stock controller will purchase all orders, receive deliveries and be totally responsible for ensuring that products coming into the warehouse match up with what was ordered.
Finale Inventory’s assembly and light manufacturing settings can also help you keep better track of both raw materials and finished goods.
7. Remember Quality Control
Finally, always remember quality control. No matter what you sell, you want to make sure your product looks good, works correctly and does what it’s supposed to do. Some businesses have a person in charge of quality control, while others have a team who do quick once-overs during stock audits or when the stock is coming in to check for damages and other issues.
When your product is of the highest quality, it shows your customers you care about what your business produces. This extra effort also helps with inventory management because you can ensure your shelves have only the best products at all times. Broken, faulty or aesthetically displeasing products won’t clutter your storeroom, giving your best products the spotlight they deserve.
Set Your Small Business up for Success With Finale Inventory
We hope these seven small business inventory management tips will help you and your small business continue to grow! If you’re interested in making your inventory management even simpler and more effective, consider Finale Inventory. We offer a flexible, lightning-fast solution for inventory management. We’re also built to help small businesses scale quickly. Several of our successful clients report growing their business four times with the help of our powerful inventory management tools.
Plus, when you choose Finale Inventory, you get free training and consulting included with your plan. We’ll teach you how to keep inventory for a small business using our powerful yet simple software.
To learn more, sign up for a free trial or schedule a live demo today.