Excel inventory management techniques: 7 essential tips (+ free template)

Inventory management is the operational backbone of any business with a product to sell, and growth is on the horizon. According to the QuickBooks Entrepreneurship in 2025 report, 72% of business owners plan to invest in expanding their business this year. 

If you're just starting out with a small number of products, Microsoft Excel is a great tool for building your initial inventory list template. However, using Excel for online inventory management requires careful setup and a substantial time investment to be truly efficient. 

In this post, we'll give you tips on how to build and use an Excel spreadsheet for basic inventory management, setting you up for success as your business grows.

Jump to:

• Excel for inventory management, explained
• How to use Excel as an inventory management solution
• Excel inventory management template
• Pros and cons of Excel for inventory management
• 7 tips on using Excel for inventory management
• Optimize and strengthen your supply chain 
• Excel for inventory management FAQ

Excel for inventory management explained

Excel, the spreadsheet software, can be a surprisingly powerful tool for managing inventory, especially for small businesses or startups with simple accounting needs. 

While dedicated inventory management software offers more advanced features, Excel provides a readily available and cost-effective solution for those starting out.

Here's how you can use Excel to streamline your inventory management:

Automate inventory management

Excel's strength lies in its ability to automate calculations and data management. Formulas allow you to:

• Automatically calculate stock values: Multiply the unit cost by the quantity on hand to get a real-time view of your inventory value.
• Track sales and cost of goods sold: Use formulas to subtract sold items from your stock and calculate profits.
• Generate reorder alerts: Set up formulas to flag items when stock levels fall below a predefined threshold.

This automation saves time and reduces the risk of manual errors, allowing you to focus on other aspects of your business.

Organize inventory data

Excel's structured format provides a clear and organized way to manage your inventory data. This allows you to:

• Create custom columns: Track essential information like product names, SKUs, descriptions, suppliers, cost prices, selling prices, and stock levels.
• Sort and filter data: Easily find specific items, identify low-stock products, or analyze sales trends.
• Group and categorize items: Organize your inventory by product type, supplier, or any other relevant criteria.

With organized data, you can maintain accurate records and quickly find the information you need when you need it. 

Data Visualization

While not as visually advanced as dedicated tools, Excel offers basic data visualization features to gain insights into your inventory:

• Charts and graphs: Create simple visuals to track stock levels over time, analyze sales trends, or compare product performance.
• Conditional formatting: Highlight important data points for quick identification, such as low stock levels or high-selling items.

Reporting

Excel allows you to generate basic reports for inventory analysis and tracking, helping you to:

• Create summary tables: Summarize key inventory metrics, such as total stock value, cost of goods sold, and profit margins.
• Generate custom reports: Filter and analyze data to create reports tailored to your specific needs.

How to use Excel as an inventory management solution

With its familiar interface and robust features, Excel can be a powerful tool for tracking inventory, analyzing trends, and automating key tasks. Here’s how to use it. 

Step 1: Create your inventory spreadsheet

Start by creating a new Excel workbook. Then, structure your main inventory sheet with the following columns:

• Product name: The name of your product (e.g., "Blue Widget").
• SKU (Stock Keeping Unit): A unique identifier for each product (e.g., "S16T-QB-SW").
• Category: Group similar products together (e.g., "Electronics," "Apparel").
• Original stock level: The initial quantity of a product you had.
• Reorder point: The stock level that triggers a reorder.
• Unit cost: The cost of each individual unit.
• Markup: The markup at which you sell the product.
• Retail price:  The price at which you sell the product.
• Total number of orders: The total number of orders placed for this product. 
• Orders waiting to be filled:  The number of customer orders for this product that haven't shipped yet. 
• Stock waiting to be received: The quantity of this product you've ordered from suppliers but haven't received yet.
• Stock on hand: The current number of units available.

To make your spreadsheet more user-friendly, consider these formatting tips:

• Freeze panes: Keep your header row visible as you scroll down (View > Freeze Panes).
• Data validation: Use data validation to ensure data consistency in columns like "Category" or "Supplier" (Data > Data Validation).
• Conditional formatting: Highlight low stock levels with colors (Home > Conditional Formatting).

With a well-structured spreadsheet in place, you're ready to start populating it with your inventory data.

Step 2: Input your initial inventory data.

Now, it's time to populate your spreadsheet with your current inventory information. Be as accurate and detailed as possible. 

Once your data is in, you can leverage Excel's formulas to automate calculations and gain valuable insights.

Step 3: Implement key formulas

Excel offers a variety of formulas and functions to help you manage your inventory efficiently. Here are some of the most useful ones:

Analyze sales data with these formulas:

• =SUM: Calculate the total quantity of items sold.
• =SUMIF: Analyze sales for specific products or categories.
• =AVERAGE: Calculate the average number of units sold per day, week, or month.
• =SUMPRODUCT: Calculate the total value of all your inventory by multiplying the unit cost of each item by the quantity on hand and adding all those results together.

These formulas can help you manage stock levels:

• =IF: Set automatic reorder reminders when stock runs low.
• =COUNTIF: Quickly count how many items have low stock.

Finally, stay on top of your inventory and keep it organized with these formulas:

• =SORT: Sort your inventory by name, price, or stock level.
• =RANK: See which products are your bestsellers.
• =VLOOKUP: Retrieve information from other sheets, like product descriptions or supplier details.

Incorporating these formulas and functions into your spreadsheet can help you automate essential inventory control tasks, gain valuable insights into your sales and stock levels, and make more informed decisions about ordering and managing your products.

Step 4: Analyze your inventory data

Beyond basic tracking, Excel offers tools to help you analyze your inventory and gain valuable insights, like:

• Sorting and filtering: Sort your inventory by any column (e.g., low-to-high stock) or filter to view specific categories.
• PivotTables: Create summary tables to analyze data by category, supplier, or other criteria. (Insert > PivotTable)
• Charts: Visualize trends with bar charts, line graphs, etc. (Insert > Charts)

Step 5: Maintain and update regularly

To ensure the accuracy and effectiveness of your Excel inventory system, ongoing maintenance is crucial. Follow these tips:

• Regular updates: Update your spreadsheet whenever you receive or sell inventory.
• Periodic reviews: Regularly review your data for accuracy and identify potential issues (e.g., slow-moving items, stock discrepancies).
• Backups: Create backups of your spreadsheet to prevent data loss.

Excel inventory management template

We've created a free Excel inventory management template to simplify your inventory tracking. This template includes pre-set columns for all the essential information, like product name, SKU, category, and quantity. It also features built-in formulas to automatically calculate your total inventory value and track stock levels. 

Pros and cons of Excel for inventory management

Like any tool, Excel has its pros and cons. Understanding both the advantages and disadvantages will help you determine if it's the right fit for your inventory management needs.

Pros:

• Cost-effective: Excel is often already included in Microsoft Office Suite or available for free online (through OneDrive), making it a budget-friendly choice.
• User-friendly: Most people are familiar with Excel's interface, making it relatively easy to learn and use for inventory management.
• Customizable: You can tailor spreadsheets to your specific needs by adding columns, creating custom formulas, and using formatting features.
• Data visualization: Basic charts and graphs can be created to visualize inventory trends and gain insights.
• Formula-driven automation: Excel formulas automate calculations and streamline tasks like totaling stock values and identifying reorder points.

Cons:

• Scalability issues: Excel can become unwieldy and prone to errors when dealing with large datasets or complex inventory requirements.
• Limited features: Compared to dedicated inventory management software, Excel lacks advanced features like real-time tracking, barcode scanning, and integration with other business systems.
• Collaboration challenges: Sharing and collaborating on Excel spreadsheets can be cumbersome, especially for larger teams, and may lead to version control issues.
• Security risks: Excel files are susceptible to accidental deletion, corruption, or unauthorized access, potentially leading to data loss.

Ultimately, the decision of whether to use Excel for inventory management depends on your specific needs and priorities. It can be a valuable tool for businesses with basic inventory requirements, but as your business grows and your inventory becomes more complex, you may need to consider dedicated inventory management software.

7 tips on using Excel for inventory management

1. Avoid pitfalls and mistakes with Excel inventory

Many professionals avoid using Excel for inventory management for the simple reason that humans are error-prone. Finding errors on sheets of numbers and hard data is also difficult unless you know exactly what you're looking for. The only way to avoid this is to create a best practice of self-auditing and daily review to minimize errors.

2. Update immediately

Excel is not a real-time inventory management solution, so you will never be able to see the real inventory value at that moment. However, you’ll want to make sure that anyone handling orders updates the document as often as possible to circumvent issues like overselling a product that you cannot backorder.

3. Use the cloud

Traditional offline Excel documents are severely limited because only one person can use the sheet at once. Using Excel in the Cloud (OneDrive), or Google's alternative, ensures that you can invite multiple people to the sheet and edit it at once to improve self-auditing, input data from multiple sources, and speed up processes. 

There’s also the added benefit of automatic backups and syncing across all of your devices so that you can edit on an iPad or on your computer at home.

4. Take the time to consolidate data

One of the biggest issues many people have with Excel is not being able to easily analyze your historical data—but taking the time to add your entire month's data into an easy-to-read pivot table will fix this. 

It is time-consuming, but it allows you to track your sales by period and during different seasons for better inventory optimization in the future.

Here’s how to create a pivot table in Excel:

1. Select your data: Click anywhere within the data range you want to analyze with the pivot table (e.g., your inventory data). It's best to include the header row with your column names.
2. Insert the PivotTable: Go to the "Insert" tab on the Excel ribbon, and in the "Tables" group, click "PivotTable". A "Create PivotTable" dialog box will appear.
3. Confirm the data range: The dialog box should automatically detect your selected data range. Double-check that it's correct.
4. Choose where to place the PivotTable: Select whether you want the pivot table to be placed in a "New Worksheet" or an "Existing Worksheet". If you choose "Existing Worksheet," you'll need to specify the cell where you want the top-left corner of the pivot table to start.
5. Click "OK": Once you've made your selections, click "OK". A blank pivot table and the "PivotTable Fields" pane will appear.
6. Customize your PivotTable: This is where you arrange the fields from your data (the column headers) into the different areas of the pivot table. 

• Drag fields to "Rows": Fields placed here will create the row labels in your pivot table.
• Drag fields to "Columns": Fields placed here will create the column labels.
• Drag fields to "Values": Fields placed here will be summarized (e.g., summed, counted, averaged). This is where you'll typically put numerical data.
• Drag fields to "Filters": Fields placed here will allow you to filter the data displayed in the pivot table.

With a little practice, you'll be able to create pivot tables to quickly analyze your inventory data and gain valuable insights into your business. Remember to explore the various options and features within the PivotTable tools to unlock the full potential of this powerful Excel feature.

5. Review your data

Excel can be a valuable tool for tracking inventory, but it is up to you to make sure that you are tracking and calculating everything necessary. For example:

• If you're tracking time to reorder, have you included lead times (time from manufacturer to warehouse or 3PL) in your calculations?
• Are you calculating profits based on sales or based on your actual per-item profit?
• Are you using your inventory to calculate sales tax immediately?
• Is your total inventory value based on resale or purchase value?

Going over the figures you use in your calculations to ensure that they are correct can save you expensive and time-consuming mistakes in the future.

6. Audit and review

Excel relies on people to input data unless you have a barcode scanner connected to your system, and even then, not everything is automated. This will lead to human error like over- or underestimating profits or reordering the wrong amount, which can throw off your entire supply and demand.

A policy of keeping track of everything on paper as well as in your Excel document allows you to go over your inventory at the end of each day to correct any mistakes.

7. Know when to upgrade

Excel is a great tool for basic inventory management, but it may not be the best long-term solution for all businesses. As your business grows and your inventory becomes more complex, Excel can become cumbersome and time-consuming. 

Consider upgrading to a dedicated inventory management system if:

• You have a large number of SKUs (100+).
• You need advanced features like real-time inventory tracking, barcode scanning, and multi-user access with permissions.
• You want to integrate your inventory management with other business systems, such as accounting or e-commerce platforms.
• You need more advanced reporting and analytics capabilities.

Ultimately, the decision of whether to upgrade to dedicated accounting software with inventory management features depends on your specific needs and budget.

Optimize and strengthen your supply chain 

Excel can be a valuable tool for establishing foundational inventory management practices, especially for businesses just starting out. Its accessibility and customizability make it a great starting point for tracking inventory, analyzing basic trends, and even automating certain tasks with formulas. However, as your business grows and your inventory needs become more complex, the limitations of Excel become apparent.

That's where dedicated accounting software with robust inventory management features, like QuickBooks Online, comes in. QuickBooks Online offers a comprehensive suite of tools designed to streamline and optimize your inventory management processes.