Consumers often fail to recognize the difference between stock-keeping units (SKUs) and barcodes, but as a product seller—especially if you operate a small business—it’s important to understand the differences between the two codes. While both help manage product inventory and keep track of sales, their respective specific meanings and implications for your business are very different. Understanding the difference helps you make better decisions for your company’s unique situation.

Learn More About SKUs

SKU (pronounced “skew”) is a number that identifies all your product features (colour, size, etc.). It allows you to keep track of your inventory with ease. SKUs are alpha-numeric-based and usually consist of eight digits, and companies of any size can generate SKUs easily. It’s a good idea to make your first task a list of the variants that describe your product and/or activity:

• Type
• Brand
• Colour
• Size
• Gender
• Stock location
• Origin
• Purchase date
• Other essential information or example, say you’re selling red boots for women in a size 6. You might create a SKU using the following:
• Colour: RD (for red)
• Type: BTS (for boots)
• Gender: W
• Size: 06

You can put it together to get the SKU RD-BTS-W-06. While customers may not notice that any of this has meaning, this SKU tells you valuable information about the product in a way that’s easy to track and organize.

Four Major Reasons Why a Small Business Should Use SKUs

1. SKUs increase your company’s efficiency and productivity by facilitating operations (sales to inventory), sorting and searching at every stage of the sales process. Most of all, the SKUs help you keep track of every item in real time.
2. They improve your inventory management dramatically by simplifying tracking inventory to prevent any stock-outs. SKUs also simplify managing of multi-location stock.
3. They enhance quality control and customer satisfaction by decreasing human errors, and allow for faster delivery to your customers.
4. SKUs boost your profitability by providing better analysis of your stock and sales, and improve the decision-making process.

Best Practices to Optimize SKUs Setup

Setting up SKUs is easy, but it’s a good idea to follow a few rules to maximize their use. It’s beneficial to make sure you never use the same SKU for different products and avoid using a manufacturer’s SKU, as they’re often too long – if you change suppliers, they become meaningless to your business.

Here’s a few suggestions to make formatting easier for your company:

• The format should always be the same and easy to understand
• Letters and digits should have a meaning (e.g., S, M, L, XL).
• Begin with a letter and never with a zero – it’s easy for humans or software to misread.
• Keep it short: between 8 and 12 characters.

Selecting the Right Apps to Fully Benefit From Your SKUs

A SKU is a code that requires a link to a tracking system that ties all components of a small business together. To optimize your organization easily and track SKUs, you can choose an intelligent and reliable online inventory and order system, such as erplain.

Inventory management software connected to a smart accounting application, such as QuickBooks Online, takes your business to the next level. By integrating seamlessly with QuickBooks Online, you can seamlessly synchronize information, including:

• Invoices
• Purchase orders
• Products
• Inventory
• Customers
• Suppliers.

It’s a good idea not to underestimate the benefit of creating SKUs. If you’re a small business, there are many tools on the market to help you manage and make the most of your SKU system. Managing SKUs properly boosts and facilitates your activity in many ways.

What’s the Difference Between a SKU and UPC?

It’s easy to confuse SKUs and Universal Product Codes (UPCs) and it happens frequently. SKUs differ from UPCs in many ways. A UPC is numeric-based, universal, and consists of 12 digits typically accompanying a barcode. This number allows you to keep track of a product at various points in the supply chain, and it’s mandatory for products you sell through the retail supply chain.

An international organization—GS1, formerly known as the Uniform Product Code Council—generates and issues the UPC codes to ensure the standards. This is the organization to turn to if you have questions or concerns regarding the legitimacy or compliance of any UPCs you purchase.

Understanding Barcodes

The barcode remains the same 12-digit code for each product, regardless of the retailer selling it. This system makes it easier for your customers to find a specific item at your retail location and know they’re receiving the same item. It distinguishes barcodes from the SKU codes that are genuinely unique to your business.

When you manufacture goods or create products, you need to purchase UPCs to ensure the governing body doesn’t issue identical UPCs for two different items. Companies that provide UPCs often sell them online, and most companies maintain rigid integrity standards to prevent duplicate codes on the market. It’s always a good idea to vet the UPC provider you choose.

Barcodes in International Sales

If your company sells products on a global scale, certain countries may require a specialized version of a UPC code. This 13-digit code is an International Article Number (IAN) or a European Article Number (EAN). If you’re uncertain which code to select for a country where your company plans to sell its products, you can check with the retailer you sell through.

As a small business owner, you want to help your customers find your products or items they need in your store. SKUs and barcodes can help. Tracking inventory and sales is essential for your cash flow. 4.3 million customers use QuickBooks. Join them today to help your business thrive for free.