• Share

How to Organize Inventory for Small Businesses in 8 Steps

If you’re a small business owner, keeping track of inventory can be daunting. I know from personal experience. There was one time when I had to organize inventory for my business and it felt like an impossible task. This article will teach you how to organize inventory and keep on top of things.

8 Steps on How to Organize Inventory

Inventory management is the process that ensures the right products are available at the right time and in the right quantities to sell to customers. By accurately managing inventory, you can increase your revenue by avoiding stockouts, excess inventory, or unsold products.

The easiest way to organize inventory in businesses is to use software programs to automate the process.

For the success of your business, it is important to know how to organize inventory effectively. By following these 8 steps, you can ensure that your inventory is well-organized and easy to manage. 

Step 1: Organize Product and Vendor Information

The first step to getting organized is to set up an inventory management system. Some business owners prefer using a spreadsheet, while others prefer to use software.

A point of sale (POS) system is best suited for retail businesses as it keeps track of vendor directories and product listings. This makes it a lot easier for business people to keep track of their inventory.

To organize the products you sell, you’ll need to record information on each one and put it on a product detail page. The product information you need would include the following:

  • Product name
  • Quantity
  • Stock-keeping unit (SKU) number
  • Universal Product Code (UPC) or European Article Number (EAN) or other unique identifiers
  • Short description
  • Product category, class, or family
  • Wholesale cost
  • Regular retail price/MSRP
  • Selling price
  • Colors or sizes
  • Vendor, supplier, or manufacturer name
  • Reorder quantities
  • Shipping details: size, weight, box pack, cost, dispatch time, etc.
  • Picture or product image

Having all of your product and vendor information in a centralized location will streamline your process of tracking your products and suppliers.

You’ll need to write down all of the details about your products, such as their descriptions, prices, and any associated images or videos. You’ll also need to list your vendors, such as their addresses, phone numbers, and email addresses.

Step 2: Create and Submit Accurate Purchase Orders

Basically, purchase orders (PO) are documents that buyers create to document the purchase of goods that will be delivered at a later date.

Tracking your inventories can be a hassle, but purchasing orders can make the process easier. With PO, you can keep track of all your purchases, from placing to receiving and paying the bills. This makes it easier to stay on top of your supplies and ensure that you have what you need at all times.

When creating purchase orders for inventory, it is important to plan your finances carefully. Having an accurate picture of your projected cash flows will help you create a purchase plan that benefits your company.

It is important to keep track of your purchase orders from your supplier. This will help you stay organized and prevent any issues with receiving the wrong products.

By cross-referencing your deliveries with your expected order, you can be sure that you are getting what you need. This will also help in keeping an accurate inventory count, which can save money in the long run.

Many point-of-sale (POS) systems are equipped with a directory feature that allows you to manage contact information for vendors. Some even have an integrated purchase order (PO) feature that can send orders directly to your suppliers.

This will prevent customers from ordering an item that you don’t have in stock, thus preventing disappointment.

Step 3: Receive Inventory Orders Accurately

It is important to check that you have received the correct amount of stock from your supplier, in order to avoid any issues with inventory levels.

Make sure to keep track of your inventory levels, as mistakes can happen and result in lost products.

To ensure accurate inventory, you should put all unpacked boxes and their contents in the same spot, then physically check each box and its contents against the PO.

Double-checking all incoming shipments against your PO helps to ensure accurate inventory management.

It is important to check all shipments against your Purchase Order. Most vendors will include a detailed Packing Slip with the delivery that lists all items and quantity. If, however, there was an error made during ordering, the shipping documents may not match the P.O., so it’s important to check for discrepancies.

To avoid any inventory issues, you must compare your purchase order to the items you receive.

Step 4: Tag and Label Inventory

Once your merchandise has arrived, you’ll want to be sure to properly mark and package it. Your packaging should prominently feature two pieces of information:

When selling your products, make sure you label them with a price, so customers know how much they’ll be paying. You should also implement a system to keep track of how much inventory you have. A barcode scanner for sales is also recommended.

Labeling and tagging your inventory during the receiving process is an effective way to ensure that items aren’t accidentally misplaced or mislabeled.

Use printed barcodes or QR codes to track your inventory at your point of sale. You can also print your barcode directly onto your packaging, their pricing tags, or their shelves.

If you’re not using SKU numbers, simply add a price label to the inventory. This makes it easy to track and manage your stock.

Step 5: Organize Your Stockroom

Organizing your warehouse can be a huge help for both you and your staff. Not only will it make finding items easier, but you’ll be able to store more inventory and keep track of everything. By taking the time to organize, you’ll make life much easier for everyone.

Having a large warehouse space allows you to store more items. You can do this by utilizing the built-in shelves and overhead racks. This helps you organize your inventory and make the most of your available space.

When organizing your stockroom or warehouse, it is important to choose storage devices that will work well with your merchandise and can be easily adjusted as needed. This will help you keep things organized and efficient in the long run.

Keeping your warehouse organized and efficient is key for inventory management. Keep things clean and easily accessible, and label everything.

Goods are much easier to keep track of when put in boxes and stacked on shelves. Hanging dividers for clothing, as well as plastic or cardboard containers, are also useful.

A well-organized stockroom can help improve employee productivity and efficiency while also reducing the likelihood of stockouts. By keeping inventory organized, you will be able to more easily see what needs to be restocked and plan accordingly.

Step 6: Track Inventory in Real Time

Good management of your inventory levels means knowing how many you have in stock and where they are at all times.

Whether you record sales manually or through your point of sale (POS), sound inventory management systems track all sales and update your inventory accordingly.

A point of sale (POS) system is the best solution for keeping track of your stock in real-time. Every time you make a sale, your PoS will update your stock automatically so you’ll always know what’s available. This will save you a lot of time and money compared to using spreadsheets.

Step 7: Conduct Regular Inventory Counts

Conducting regular inventory counts can be tedious, but it’s a great way to reduce inventory problems.

Businesses should perform full or periodic inventories to ensure that their stock levels are accurate. This is especially important if you use a point of sale (POS) system that tracks your inventory.

There are two ways you can count your inventory: manually or with a POS system.

Manual counting is a more traditional method of inventory management. It involves physically counting each item in your inventory and keeping track of the numbers manually. This can be time-consuming, but it’s also very accurate.

Automated POS counting is a newer method of inventory management that uses technology to keep track of your inventory levels. POS (point of sale) systems can automatically keep track of sales and stock levels, so you always know how much inventory you have on hand. 

Step 8: Reconcile Discrepancies

There may come a time when your projections for the number of orders you expect to sell do not match the actual number of products you have in stock. This could be due to several reasons, such as canceled or returned orders.

If your actual count does not match your expected quantity on hand, you will need to investigate and figure out the reason for the difference. In business, this is known as “shrink.”

Shrink is the difference between the number of items you expected to have in stock and the actual number you have.

There are two primary reasons for inventory shrinkage: clerical error and theft.

There are times when mistakes happen, and an item is mislabeled or shelved in the wrong place. However, if items are consistently going missing, you need to investigate further.

If you’ve determined that your loss is indeed permanent, you should update your stock count to reflect your new reality. After that, you should adjust the dollar value of your losses.


Now you know how to organize inventory for your small business. By keeping track of your inventory, you’ll be able to make sure that your business is running smoothly and efficiently.