Inventory Management and Your Small Business:
As a small business owner, you should regularly evaluate your business. This ensures you are on track to achieve your sales targets and highlights areas for improvement. Inventory management is a vital part of your business, making sure that stock is managed efficiently, to maintain customer satisfaction and help you to grow.
How would you rate your business’s current system? Have customers ever been kept waiting due to lack of stock? Or have you ever been overrun with excess stock?
Whatever your small business’s situation, this article guides you through inventory management techniques and software. We share our top tips to ensure that you strike the right balance when it comes to stock.
As part of the supply chain, inventory management aims to make sure that the correct products are available at the right time and in the required amount. Successful small business inventory management reduces costs and boosts sales. This streamlines the process, tracking inventory in real time, so you can meet demand.
This approach can shield your small business from a number of problems. You avoid the issue of products being out of stock and minimize the likelihood of cash being tied up in excess stock. It also prevents products from spoilage and obsolescence, saving space in your warehouse.
What makes good Inventory Software for Small Businesses?
How can inventory management software help your small business? Here we outline the benefits your small business could gain.
- Minimize costs and help cash flow
- Real-time tracking of inventory
- Accurately forecast demand
- Stop any product or production shortages
- Prevent excess stock
- Small business inventory tracking software enables simple inventory analysis on any device
- You can be accessible from your retail point-of-sale system
- Better use of space in your warehouse
- Make the best use of your employees’ time
- Fast and easy barcode scanning
- Multi-location management, to track stock in several locations
Inventory Management Top Tips:
Here we list some of the most popular techniques used by businesses.
- It is important to make sure that forecasting is accurate. It should be based on several factors. These include sales figures, promotions, predicted growth, the economy, and marketing.
- Use the first in, first out approach (also known as FIFO). With this approach, goods should be sold in order from when they were purchased or produced. This is important if your small business sells products such as food, cosmetics or flowers. However, it is also a good idea for non-perishable goods, as stock which is held in your warehouse or stockroom for too long may become damaged or out of date. To apply this approach, simply add new items from the back, as this ensures that older products will be at the front.
- Auditing stock is another vital activity. Even if you are using good inventory management software, it is still important to carry out periodic audits of your stock. This ensures that your actual stock levels match up with your assumptions. Different businesses use different techniques. For example: annual, year-end physical inventory to count each item, or ongoing spot-checking: an approach which benefits products which may have issues with stocking, or move quickly.
- Another top tip is to use cloud-based software. Using real-time software ensures that your stock levels readjust whenever you make a sale. With this type of software, you can receive stock alert email notifications, so you can efficiently manage your stock levels.
- Tracking your stock levels is vital at all times. It is also a good idea to prioritize the most expensive products. This is an area where software can save your small business time and money, by doing the hard work for you.
- Lastly, it is also a good idea to remember your ABC’s. This involves grouping inventory into A, B and C, and gives you greater control over more expensive items. Products under the ‘A’ grouping are big ticket items which make up the smallest percentage of inventory. On the other hand, products in the ‘C’ grouping are least expensive. They make up the biggest percentage. Products grouped as ‘B’ are in between.
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It is important to reduce the repair times of any essential machinery. Time is money and broken machinery can be costly to your small business. It is a good idea to monitor your machinery, its parts and its life cycle, so you can address any problems quickly.
We must also consider quality control. Whatever your small business sells, it is vital to make sure your products look great and perform equally well. Quality control practices could involve staff performing quick checks during the stock audit, with a checklist of points to look out for.
How software simplifies Inventory Management:
Inventory management software can provide your business with many benefits. One of which is the ability to provide updates in real time. This allows you to manage your small business’s inventory from anywhere in the world. For businesses operating on and offline, software can also be fantastic in syncing your online store with your brick-and-mortar store. It’s quick to set up and easy to use. In many cases, you can also use an app to download reports and receive alerts with items which are low or out of stock.
If you produce and sell your products, then you may own your whole supply chain. Instead of sourcing your products from elsewhere, you require raw materials to create your products with. For this kind of small business, inventory usually includes:
- The raw materials needed
- Products which are a work-in-progress
- Completed products
Many businesses have learned the hard way what happens when supply is greater than demand. Needless to say, you do not want to be in this position. One of the factors which play a big part is accurate forecasting of sales figures.
You may not be a multinational business (not yet at least!), but good inventory management is just as powerful at saving your business a lot of money. This is especially important if you are just starting out. You may be tempted by vendor’s promotions to bulk buy stock in large quantities. Remember, what appears to be a good deal could leave you with excess stock and prove costly.
It is not a good idea to have too much of your business’s cash tied up in unnecessary stock. This is especially true if you have a time limit on when your products need to be sold by. For example, seasonal products end up heavily discounted if they are not sold in time. Most importantly, if you have excess stock, you need somewhere to store it and this can be costly too.
On the other hand, not having enough of a certain product, or having access to it when you need it can be costly. This can cause your customers to go elsewhere. If your product is out of stock, there is no guarantee that the customer will wait around. In fact, a study found that 63% of shoppers who experienced an out-of-stock product chose to purchase the product elsewhere, or did not purchase it at all.
Are spreadsheets a good way of managing inventory?
To put it simply, no. Spreadsheets are not an effective inventory management tool, as they need to be manually updated which is time-consuming and means the data is nearly always outdated. Furthermore, spreadsheets cannot scale with your business, or communicate with your POS. They will not be able to tell you how your products are selling.
Isn’t inventory management software expensive?
It doesn’t have to be. Whilst some software cost hundreds or thousands of dollars, there are still effective solutions at an affordable price which can help your small business. There are some software packages where you can start with a ‘basic’ package, and as your business grows you upgrade or purchase the ‘bolt-on’ options. This allows you as a small business to start on the right track, and allow your inventory management software to grow with the business.
Talk to an expert to help you choose the right software program suited to your business.