When you’re running a small business, inventory is your lifeblood and your main asset. But as products move through your business at different rates, inventory can get very complicated.
Managing your accounts is a balancing act. You can’t have an excess of inventory tying up your cash and taking up precious space. At the same time, you can’t afford to run out of your best-selling items and risk disappointing your customers, who are always only a click away from shopping with someone else.
The key to a good inventory system is the ability to pinpoint which products move quickly and which take more time to sell. It also needs to be intuitive and simple enough to let you get on with all the other aspects of running the show.
Here are some tips on better managing your inventory:
Get supplier assistance
An effective method which some retailers use is to ask for the help of their suppliers. Vendor-managed inventory gives you access to their inventory data, sharing the burden of inventory management with them. In many cases this is a win-win because it is in their interests to stay on top of your inventory just as much as it is yours. The supplier can then generate purchase orders based on your needs and timings.
Make accurate projections
As a retailer with repetitive orders of the same products, you need to know at what stock level you should replenish your inventory. The goal is to reduce inventory levels while being able to fill the orders that come through the door. There are a variety of formulas which you can use to forecast these. Some can be added into accounting Excel spreadsheets, while inventory management software add-ons can automatically integrate with online bookkeeping tools, such as Intuit QuickBooks, to create patterns and form predictions.
With inventory being your main asset it is important to know what is in stock, on order or running low. An inventory management system lets you set automatic stock reorder points, perform adjustments and stay on top of how stock is moving.
Other businesses opt for the “just in time” method, in which they plan to receive stock as it is needed instead of maintaining a high inventory, or sell via drop-shipping, in which a third party fulfills the orders. The e-commerce site Shopify offers a thorough guide to this.
Track stock online
Once you have the stock, you need to be able to track it. If you are selling on multiple storefronts online, you will need a system that gives you an accurate picture of your stock. Online inventory management software links with most popular e-commerce platforms such as Amazon, Etsy, Shopify and PayPal, saving the need to double up on data entry. The software will automatically create and track products, including all descriptions and photos, which are listed on your e-commerce storefront.
Use barcode scanning
Logging a manual stock count in a spreadsheet may take days and is prone to human error. Automate and streamline processes and avoid data entry mistakes by using barcode scanning as part of your stock count, ideally one that is integrated with your accounting software.
Choose the right tools
While larger companies can afford dedicated staff and a bespoke IT system to manage their inventory, small businesses usually lack the funds to implement such resources. Inventory management systems can level the playing field for small businesses.
It’s tempting to rest on your laurels when things are going well…until they aren’t. Evaluate your systems regularly so you can get ahead of any problems with a plan of action before they arise. Reach out to fellow business owners and find out what worked – and didn’t work – for them. In such a complex area as inventory, hearing about the learning curves that your peers have experienced can be invaluable.
To find out more about systems that can help you run your business, and to ensure you get it right in your first year of retail, check out the posts in our Small Business Centre.