Helpful Tips for Organizing and Managing Your Business Inventory
What started as a hobby, side hustle, or microbusiness is now growing into something bigger and better. That means it’s time to get serious and start implementing systems into your business.
One important part of a small business that often gets overlooked is inventory management. Smart inventory control can help you reduce costs, prevent stockouts, minimize waste, and make better decisions about your product offerings. That’s all to say it’s time to upgrade from boxes of inventory stashed in your garage, guest bedroom, or attic.
Understanding Inventory Management Systems
As your business grows, you’ll need to rely more on systems to help standardize all the aspects of your company. An inventory management system will help you with things like:
- Ordering
- Storage
- Tracking
- Auditing
- And more
Don’t worry – your inventory management system doesn’t have to be complex or expensive. Your options range from simple manual methods to sophisticated software.
Manual Inventory Systems
If you are an old-school type of person, you can manually manage your inventory using physical count sheets and handwritten ledgers. This could work well for smaller and newer businesses, but it will become increasingly time-consuming and challenging as your business grows.
To upgrade from physical count sheets, try using Microsoft Excel or Google Sheets. These programs are easy to use and include convenient math and tracking functions for greater inventory visibility.
Software Solutions
Ready to take your inventory management system to the next level? The great news is that you’ve got a range of different software solutions to lean on. This includes basic inventory apps all the way to comprehensive enterprise resource planning systems. Most small business owners will choose the former.
A few good inventory management apps under $100 a month include:
How to Get Started with Inventory Management
How do you go from a thousand boxes of inventory stacked in your garage to a well-designed and well-organized inventory management operation? Every entrepreneur’s path is different, but here are a few valuable steps to consider.
- Identify Your Inventory: Open up those boxes and give each product a name and a unique identifier known as an SKU. Different sizes, colors, and product models get their own SKU. If it makes sense, you can also organize similar products into categories.
- Count Your Inventory: Now that every item has a name and SKU, start counting so you know exactly what you have on hand.
- Create Your Tracking System: Open a spreadsheet or purchase an inventory app. Input all your product information. You’ll need to know things like quantities, costs, locations, and selling prices.
- Set Par Levels: Decide the minimum quantity of each item you want on hand. This will tell you when to restock different items.
Review and Adjust: The best way to determine if your system works is to jump in and start using it. Over time, you’ll refine and improve your process.
Organizing Physical Storage Space
Good organization is the heart of a functional inventory management system. That goes for both your online and physical inventory.
First, find a space to see and manage your inventory easily. For smaller businesses, you may be able to store items on shelves in a garage or spare bedroom. Consider renting a storage unit or moving your inventory into a warehouse or fulfillment center as your operation grows. If it fits your business model, you may also consider working with a drop shipper. Self-storage for small businesses can be valuable because it can include lower storage fees and more flexibility in managing inventory directly.
Tracking Your Inventory
Ideally, your inventory won’t just sit on shelves. It’ll be moving out to customers at a brisk pace. Tracking your inventory will help you understand how each product performs and may even prompt ideas for new products your customers will love.
Set Reorder Points
To get the most out of your inventory tracking, make sure to set reorder points for each product. When setting these points, account for the lead time from suppliers and the average pace of product sales.
Monitor Sales Trends
Analyze your data and see what you can discover about your customers’ habits. Do they tend to buy certain items on certain days or seasons? Does weather or location impact sales? Use these insights to stock up on items during popular months and to cut back during slower seasons.
Integrate Your Systems
If you’re using an inventory management app, integrate it with your point-of-sale (POS) system to receive automatic inventory updates and view your stock levels in real time.
Track Key Metrics
What exactly should you track within your inventory management system? Here are a few to start with:
- Inventory Turnover Ratio: How quickly you sell and replace inventory.
- Carrying Cost of Inventory: The total cost of holding inventory.
- Stock-to-Sales Ratio: The amount of inventory you have compared to your sales.
- Stockout Rate: How often you run out of items.
Barcodes and RFID Tags
As the complexity of your business grows, you may need more technological help to track all the ins and outs of your inventory. Two extremely popular tools are barcodes and RFID tags. They help reduce manual data entry errors and make it easier for you to conduct stock counts. You can invest in handheld scanners or even smartphone apps to read your barcodes.
Inventory Audits
Inventory management is not a “set it and forget it” enterprise. Instead, you’ll want to perform regular inventory audits to maintain an accurate record of your stocks. This is especially important when using a manual or low-tech inventory management system.
At least once a year, conduct a complete inventory where you count all your items. You may also want to try cycle counting, which means counting subsets of inventory throughout the year. Schedule counts during slow periods in your business and recruit help if you can. What are business partners or interns for, after all?
Get Serious About Inventory Management
If you don’t know what inventory you have or how those products are performing, you’ll be cutting your business off at the knees. Today, so many great and affordable software options make it easy to track and analyze your inventory effectively. If you’re not quite there yet, even using spreadsheets can give you more visibility into your inventory. Just make sure to also focus on keeping your inventory organized in the real world as well.
By implementing good inventory management, you’ll gain valuable insights to help your business grow even faster.