How to Take Inventory for Your Small Business: 9 Tips to Kickstart Your Strategy

There are few things more critical to the success of your small business than a robust and well-rounded inventory management process. The difficulty is, assuming you’ve never needed to manage inventory before, it’s tough to know where to start.
With inventory management, there can be many moving pieces. Made significantly more confounded by the reality there’s nobody right method for manage inventory. What works for the business down the road may not work for yours.
In this article, we’ll provide you with a bunch of widespread rules that you can change and make sense of the rudiments of how to take inventory for a small business.
Inventory for Small Businesses

How To Take Inventory for A Small Business

  • What is inventory management?
  • Maintain a high level of organization
  • Receive inventory accurately
  • Use the right tools
  • Make data-driven decisions
  • Have a formal process in place
  • Do regular inventory counts
  • Optimize your storage space
  • Implement Just-In-Time inventory
  • Establish strong supplier relationships

What Is Inventory Management?

inventory management is an interaction and set of frameworks for managing inventory and stock. It’s a subset of a lot more broader supply chain management concept. For most retail organizations, inventory management will embody the accompanying assignments:
  • Ordering stock
  • Storing stock
  • Selling stock
  • Tracking stock levels

The Importance Of Inventory Management

Effective management ensures that a business has the perfect proportion of stock at the right time, forestalling both overloading and stockouts.
Importance Of Inventory Management
While these undertakings might appear to be commonplace, and even “simple” or “easy,” doing them (and doing them competently) makes an unshakable starting point for your business to work from. You’ll stay away from expected issues and appreciate advancements like:
  • Prevent out of stock issues for your popular products
  • Know the kinds of sales/promos to run to move underperforming stock
  • Know the right quantity of items to keep on hand to maintain optimal cash flow
  • If you sell perishable goods, it can help you avoid spoilage

Common Inventory Management Challenges

Common pitfalls in inventory management include:
  • Overstocking: this ties up capital and storage space, potentially leading to obsolescence or wastage
  • Understocking: this can result in lost sales and customer dissatisfaction due to unavailable products
  • Mismanagement of Perishable Goods: this often leads to spoilage and financial loss
To resolve these issues, follow our tips, such as utilizing mechanized inventory management systems, keeping up with clear correspondence with providers and routinely breaking down deals information to tweak inventory practices. These strategies help balance supply and demand, ensuring operational efficiency and customer satisfaction.
Common Inventory Management Challenges

1. Maintain A High Level of Organization

The first step in staying on top of your inventory is to coordinate your things with however much information and item data as could reasonably be expected. Effective inventory management is an immediate consequence of solid information examination. By beginning with rich, precise item information, you’ll keep away from blunders down the line and make some simpler memories researching any issues you could reveal.
Ordinarily, this information would be entered into a point of sale (POS) system, but on the other hand it’s conceivable (but very tedious) to track this data with spreadsheets.
Here’s a portion of the information you’ll need to include for each product:
  • Name
  • Department
  • Category
  • SKU
  • UPC
  • Supplier and Supplier ID
  • Sales Price
  • Tax Rate
  • Discountable (Y/N)
  • Cost per Item
  • Current Quantity
  • Reorder Trigger
  • Recommended Order
On the off chance that you sell things with variations, you’ll need to ensure that you enter every variation as a feature of a matrix. The exemplary illustration of a thing with variations is a shirt that is sold in numerous sizes and tones. Every mix of size and variety is an exceptional variation of one parent item. By making a grid, you will actually want to follow the amount, deals information and something else for every variation on a singular premise.

2. Receive Inventory Accurately

Similar to our most memorable tip, you’ll need to guarantee that you get and include new stock from providers into your point of sale system as precisely as could really be expected. Entering some unacceptable item amount or mislabeling an item can cause a lot of issues later down the line. The most effective way to guarantee that you get and enter stock from providers precisely is to make a normalized interaction and follow it each time you get a shipment.
Here’s an example of what that process might look like:
  • Whoever is receiving the shipment should have a list of the items you’ve ordered or a copy of the original purchase order
  • The receiver should ensure that all expected boxes/packages are received (i.e. nothing is left in the truck)
  • The receiver should unpack all boxes and compare the contents against the list or purchase order
  • If there are no errors or issues, go ahead and enter the shipment data into your POS, spreadsheet or other tracking systems
  • If there are issues, take note of them and contact your supplier. You can then enter the rest of the shipment into your system
Since getting a request precisely is a particularly significant part of inventory management, you might need to deal with this part of the business yourself or depend on a confided in senior worker.

3. Use The Right Tools

Inventory management is much more straightforward when you use POS software. This is the case on account of the amount of information and the rate at which inventory turns over inside most retail organizations. Assuming you attempt to manage everything with a spreadsheet or pencil and paper, almost certainly, the undertaking will begin to feel like a weight that you need to skip toward the finish of a bustling day. In addition, with such countless moving parts, you improve the probability of mistakes, which can lose all of your inventory information.
With a POS system, beyond making your product catalog (commonly done once during beginning arrangement) and getting new stock, inventory management is a automated process. At the point when you sell an product, your stock levels are automatically updated. You can undoubtedly question your framework to perceive the amount of you possess of an item close by, and there are regularly nitty gritty inventory reports that you can use to all the more likely grasp what’s happening in your business.

4. Make Data-driven Decisions

One of the principal motivations to utilize a POS, particularly from a inventory management viewpoint, is the range of reports you’ll have available to you. These reports will cover everything from sales volume by product, profit margin analysis, inventory turnover rate and much more. With this data, you’ll have the option to pursue more educated choices that assist you with molding your general business system.
The following are a couple of the bits of knowledge that you can hope to get from your point of sale system’s reporting capabilities:
  • Distinguish your top selling items so you can focus on keeping them very much supplied. Lightspeed customer Limbo Jewelry can impart sales to providers on account of implicit reports: “They say we’re the most coordinated store they work with on the grounds that we’re ready to pinpoint precisely exact thing’s selling, precisely what’s not selling.”
  • Monitor profit margins per product so you can distinguish chances to rework with your providers
  • Check your inventory value at some random opportunity to comprehend how much capital you have restricted in inventory
Assuming you’re a Succeed wizard, certainly possible to create similar reports with spreadsheet software and custom formulas. Notwithstanding, you’ll have a lot more straightforward season of it on the off chance that you get a POS system and allow it to do the calculating for you. Also, this lets loose you to focus on tasks to grow your business, such as deciphering your reports and going with better choices in view of your discoveries.

5. Have A Formal Process in Place

While tools like a POS or dedicated inventory management software can assist with working on inventory management and permit you to get additional worth from your information, you actually need an overall cycle set up. Two of the most popular methods are First In, First Out (FIFO) and the average cost method.
Organizations that utilize FIFO try to sell more established stock before fresher stock. For specific business types, similar to those that sell transient products, FIFO is an essential method for getting however much worth from stock as could reasonably be expected. For instance, envision how a corner shop stocks drinks.
Organizations that utilize FIFO try to sell more established stock before fresher stock. For specific business types, similar to those that sell transient products, FIFO is an essential method for getting however much worth from stock as could reasonably be expected. For instance, envision how a corner shop stocks drinks. Things toward the front of their fridges regularly lapse sooner than objects set toward the back.
For the typical expense technique, organizations will allocate the expense of a thing in light of the absolute expense of merchandise they bought separated by the quantity of units bought. This technique is less complex to apply and more affordable than FIFO, making it an engaging choice for things that are hard to ascertain costs for.
No matter what the overarching system you use, it’s fundamental that you comprehend the advantages and disadvantages of each approach so you can choose the right one for your business.
6. Do Regular Inventory Counts
Regardless of whether you have a POS system or inventory management tool set up, as well as an interaction for getting stock, you’ll in any case believe should do manual stock counts occasionally. Contingent upon the size of your business, you could do these on a semi-yearly, quarterly or even month-to-month premise.
These counts are significant in light of the fact that they capability as a reinforcement to your everyday system and can assist you with revealing imperfections in your process. In the event that saving an opportunity to count all of your inventory without a moment’s delay sounds somewhat overpowering, you can likewise perform cycle counts.
Cycle counts are faster checks where you count just a more modest piece of your inventory. For instance, one month you could check your shoe inventory, and another your cap inventory. Other than saving you time, doing so can assist you with uncovering issues substantially more rapidly than a more gigantic quarterly check, however specialists suggest that you do no less than one full inventory count each year for personal expense detailing.

Fast tip: make cycle counts more exact by utilizing an tool like Scanner by Lightspeed, which transforms a mobile device into an Inventory Management tool that refreshes your POS progressively. You could actually make counts go quicker by having numerous workers depending on individual devices simultaneously.

7. Optimize Your Storage Space
Begin boosting your current extra room through effective utilization of racking. Utilize vertical space by introducing tall racks to store items, guaranteeing you utilize the full level of your storage area. Group similar items together and keep regularly got to products at eye level to limit time spent recovering them.
Clear naming is critical. Name retires and canisters with itemized depictions, standardized identifications or variety codes. This straightforward step can altogether decrease the time it takes to find things, lessening mistakes and further developing inventory accuracy.
Consistently review your capacity region to keep it mess free. Eliminate obsolete or sluggish stock to let loose space for new inventory. Consider a first-in, first-out (FIFO) method to ensure older stock is sold before newer stock, which is especially important for perishable goods.
8. Implement Just-In-Time (JIT) inventory
Adopting a Just-In-Time (JIT) inventory approach can essentially improve a retailer’s inventory strategy by decreasing holding costs and limiting waste.
JIT involves ordering and receiving inventory only as it is required available to be purchased or creation, as opposed to loading up ahead of time. It lessens holding costs by limiting how much stock you want to store, bringing down capacity costs and decreasing the gamble of oldness. It likewise limits squander, especially for transient things, as items are offered before they get an opportunity to lapse.

To really execute JIT:

  • Ensure suppliers can deliver products quickly and consistently
  • Utilize inventory management software to track sales trends and forecast demand accurately
  • Maintain regular supplier communication and share sales forecasts and inventory needs
  • Streamline your ordering process by setting up automated reorder points based on inventory levels and sales data
9. Establish Strong Supplier Relationships
Strong supplier relationships ensure reliable and timely delivery of goods, critical for maintaining optimal stock levels and meeting customer demands.
To build and maintain good supplier relationships:
  • Engage in regular dialogue with your suppliers. This helps in understanding each other’s needs and expectations, leading to a more cooperative partnership
  • Work towards mutually beneficial terms. Regular negotiation can lead to better pricing, payment terms and delivery schedules
  • Acknowledge the importance of your suppliers. Positive reinforcement can foster loyalty and prompt service
  • Collaborate on inventory forecasts and orders. This shared planning can reduce errors and improve the accuracy of your inventory levels
  • Implement a B2B commerce platform like NuORDER by Lightspeed to streamline the ordering process. This technology enhances efficiency for both supplier and retailer, ensuring smoother transactions, better tracking and faster fulfillment of orders

Give Your Business Stronger Tools for Inventory Management

Business Stronger Tools for Inventory Management
Inventory management is essential to your business’ tasks and achievement. Organizing your systems will go a long way as far as counting your items, setting up your floor, and making your representatives more useful and proficient. Exact counting implies further inconsistencies and a superior main concern for your business.
A POS like Lightspeed can automate inventory management for yourself and furnish you with important data to assist you with pursuing more smarter decisions. Talk with our specialists to check whether our answers are appropriate for your business.

Frequently Asked Questions

How To Maintain Inventory For A Small Business?

How to Organize Inventory

  • BOM inventory documentation and vendor information.
  • Label everything.
  • Systematically arrange product and vendor information.
  • Generate accurate purchase orders.
  • Track inventory in real-time.
  • Monitor quality control.
  • Manual inventory counting.
What Is The Best Inventory Method For A Small Business?

Follow the FIFO method

If your company makes or sells products that expire or become obsolete over time, implementing the first in, first out (FIFO) method is a must. With FIFO, you’ll use or sell the oldest inventory first to prevent spoilage, reduce waste, and ensure your products stay fresh.

How Do You Calculate Inventory For A Small Business?

What is the Basic Inventory Formula for Small Businesses? For small business owners, getting a grip on inventory management can be the linchpin of success. The basic inventory formula, which calculates the Cost of Goods Sold (COGS), is straightforward: Beginning Inventory + Net Purchases – Ending Inventory = COGS.

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