6 Tips on How to Take Inventory for Small Business
Managing your stock and ensuring that there is enough on hand for customers will help with the success of your business. If you’ve never had to manage inventory before, it can be challenging to know where to start. This article will explain how to take stock of small businesses. We’ll also provide guidelines customized and applied to your situation.
Inventory management is made difficult because there are no set ways to do it. What works for one business may not work for another, and what worked a few years ago might be completely outdated now.
What Is Inventory Management?
Inventory management is a process and set of systems for managing inventory. For retail businesses, it involves the following:
- Ordering stock
- Selling stock
- Tracking stock levels
Doing these tasks well will help you avoid potential problems and allow you to:
- Prevent out-of-stock issues for popular products
- Know the type of promotions to run to move products that are not selling well.
- Make sure to have enough inventory on hand to meet customer demand and maintain cash flow.
- Prevent spoilage (if you sell perishable goods)
1. Maintain a High Level of Organization
Organize all the products you have with as much data and information as possible. Successfully managing inventory for small businesses comes from a solid knowledge base, which can be acquired by entering this info into a point-of-sale system or using spreadsheets.
Here is the data you will need to input for each product:
- Supplier, Supplier ID
- Sales Price
- Tax Rate
- Discountable (Y / N)
- Cost per Item
- Current Quantity
- Recommended Order
- Reorder Trigger
If you sell items with variants, like a t-shirt sold in different sizes and colors, for example, it’s essential to create an individual matrix entry for each variant. More details about the product sales data – including the quantity sold of each size/color combination – will give you better insight into how well your products are doing.
2. Receive Inventory Accurately
When you receive a shipment from your supplier, it is crucial that the product quantity and labeling be accurate. This will ensure that there are no discrepancies with what was ordered and received every time you place an order for inventory to restock your store shelves or replenish items.
- Whoever receives the shipment must have a copy of the original purchase order.
- The receiver must ensure that all expected boxes and packages are received.
- The receiver must unpack all boxes and compare the content against the purchase order.
- If there are no issues, enter the shipment data into the spreadsheet, POS system. and other tracking methods.
- If there are any issues, contact the supplier.
Managing inventory for small businesses is a difficult task that relies on accurate order fulfillment. This responsibility may be too big for an inexperienced employee, so it’s best to have someone with more experience managing this business area.
3. Use the Right Tools
Managing inventory is a lot easier when you use POS software. This is the case because of all the data it collects and how quickly your stock turns over in most retail businesses. If you try to manage everything with just a spreadsheet or paper, managing will become tiresome after an exhausting day at work. Plus, if errors are made within that system, they can throw off other information.
You can use a POS system to track your inventory. Once you have created the catalog and received new stock, it is an automated process that will update when products are sold. There are reports on how much of each product you have on hand.
4. Make Data-driven Decisions
POS systems offer a variety of reports that provide insight into the business. For example, you can look at sales volume by product and see if there are any products with less than desirable turnover rates. This information will help inform your overall strategy.
Here are some of the things that a POS system can do:
- Identify the top-selling items
- Monitor profit margins for each product
- Check inventory value at any given time
It is possible to create similar reports with spreadsheet software and custom formulas, but it’s much easier with a POS system. You’ll have more time for other tasks like interpreting your data or making better decisions based on what you find.
5. Have a Process in Place
Tools like a POS or dedicated inventory management software can help simplify your workflow and allow you to get more value from data. However, you must have an overarching process when managing the items within your store.
Businesses that use FIFO will always sell the older stock before newer, which is necessary for certain companies. For example, a convenience store may constantly need to refresh their drinks inventory, so it makes sense to put all new items in front because they will expire sooner.
Meanwhile, for the average cost method, you’ll assign the cost of an item based on the total cost of goods purchased divided by the number of units purchased. This is easier to use than FIFO when things are difficult or time-consuming to calculate expenses for.
Regardless of the system you choose, it’s essential to understand its pros and cons so that you can find a solution best suited for your business.
6. Do Regular Inventory Counts
You can purchase POS systems and use software for inventory management; however, manual inventories will still be necessary every so often.
Counting inventory is important because it can help you uncover any flaws in your system and provide a backup to the day-to-day process. If counting all of your lists at once sounds too time-consuming, cycle counts are also an option.
Cycle counts are quick checks of a small part of your inventory. For example, one month, you might check your shoe inventory and another time look at the hats in stock. This saves both time and energy because cycle counting only covers smaller sections instead of an entire quarterly count, which can take hours.
Final Thoughts on How to Take Inventory for Small Business
Properly managing inventory for small businesses is crucial to your success. Setting up systems will make counting more accessible and more accurate, which means better profit margins for you.