If your company sells products, keeping inventory on hand is crucial for a successful, smooth-running operation. Tracking and organizing your inventory is key to this process: without knowing what you have, it becomes more difficult to meet consumer demand. There’s no one right way to organize your inventory: you have to find the method that works best for you. In this blog, we’ll explore several best practices on how you can best organize inventory for your small business.
Why is business inventory organization important?
With good inventory management, storage, and organization practices, your company is more likely to have ample stock available to sell customers. Keeping inventory organized allows you to see best-sellers and the items that don’t sell as well at a glance. Proper tracking helps you keep tabs from a management perspective, knowing what’s on hand for marketing and proportional purposes while preventing theft, over-ordering, and other issues that affect your business’s bottom line.
Additionally, demand for your products may fluctuate throughout the year, so a well-organized inventory can help you properly prepare for that expected sales bump.
Eight key inventory software program capabilities
When choosing the best inventory software management program for your company, make sure it fulfills the eight following needs:
- Cost reduction. Don’t spend money on inventory you don’t need. Your cash flow will increase, and your company’s bottom line will improve.
- Real-time inventory tracking. Every time stock leaves your shelves, you’ll know it. As such, you can plan future stock purchases accordingly.
- Stock excess or shortage prevention. Your software should clearly state when your stock is above or below the upper and lower limits you’ve set.
- Ease of use. Your inventory tracking software should be easy to use on any device, including those used at your point of sale.
- Scalability. If you have more than one warehouse, make sure your inventory tracking system can cover them all.
- Demand forecasting. Don’t get stuck with extra stock during low-demand periods. The best small business inventory programs include demand forecasting to avoid this pitfall.
- Barcode scanning. For rapid intake, choose an inventory app with straightforward barcode scanning functions.
- Efficiency. Above all, be certain that your inventory software will save your employees time on all your inventory management tasks.
Eight tips for small business inventory organization
If you’re wondering how to best organize your small business inventory, the below tips might help:
1. Count all types of inventory, not just products you sell
Inventory is sometimes described as the products your company sells, but it’s also the raw materials used to make your products. For example, instead of your local hardware store’s back closet of drills, paint cans, and shovels, inventory can also be your screenprinting company’s supply of screens, ink, t-shirts, and more. Don’t just track what you make – track what you use to make it.
2. Stay organized and descriptive
A good inventory should be like a file cabinet: Well organized, with descriptions labels for each folder. For your inventory, separate your stock and label each item with the following data:
- Item number
- Department or category
- Your cost
- Sale price
- Discounts, if applicable
- Tax rate
- The item’s UPC and SKU, if applicable
- Supplier and supplier ID
- Current item quantity
- Recommended order quantity and trigger
Note that each variant of a product – for example, a teddy bear available in brown, black, and white – should be considered a separate item while tracking your inventory.
3. Invest in a point-of-sale (POS) system
Manually noting the change to your inventory each time you make a sale isn’t just tedious – it’s prone to human error. Through point-of-sale (POS) systems, which are among the most popular inventory apps, you can automate inventory change recordings, which saves time, minimizes mistakes, and gives you real-time insight into the actual number of items your business has on hand.
Many POS systems include inventory reporting and search functions for enhanced organization. Importantly, POS systems can track sales wherever they’re made, so sales made online or at multiple locations will be reflected in this total count.
4. Accurately add your new stock to your inventory
The best way to avoid mismanaging your inventory is to minimize gaps from the start. That means accurately adding your new stock to your inventory. Double-check that you’re entering the right items and descriptions as you update your inventory. Confirm that newly arrived packages contain all ordered stock. Contact your supplier about any discrepancies.
5. Wield the power of data
Your inventory management system should provide statistics including but not limited to inventory turnover, sales volume by product, and profit margins. These data can then be applied to some of your key business decisions, such as which products to invest in or drop from your lineup.
6. Establish purchase order protocol
Through an inventory management system tool called a reorder trigger, your inventory app can automatically alert you when your stock levels reach a preset minimum. Reorder triggers can also tell you recommended purchase amounts for data-informed purchase orders. This highly efficient purchase order protocol keeps your stock supplied – and your customers happy when they see their favorite items in stock.
7. Take regular manual inventory counts
Since inventory management is paramount to small business success, you should double-check your inventory app’s data via manual inventory counts. Establish a regular schedule for manual checkups to ensure your app is working well. If checking your entire inventory sounds overwhelming, you can stagger your checks for individual inventory categories.
8. Monitor inventory loss
It’s one thing to have less stock following a high number of sales. It’s another for your stock to go inexplicably missing. That’s called inventory loss, and it can stem from employee theft, shoplifting, inventory damage, and more. Buying items that you ultimately can’t sell makes for bad business, so implement strong safeguards against theft and damage.
Five useful inventory management apps
There are dozens of inventory management apps, so how can you know which is best for your company? Here are five potential options, with a unique attribute for each:
- Delivrd, which includes pick, pack, and ship functions
- On Shelf, which indicates your most and least profitable items
- SOS Inventory, which includes advanced reporting
- Sortly, which includes custom field creation
- Inventory Now, which includes order tracking and invoicing
If implementing an inventory management system would put you over your budget, you may be eligible for additional business funding to help cover the cost.
To discover how your business financials stack up for funding, use our easy-to-use online tool. SmartBiz Advisor™ helps you track the financial health of your business and learn how banks typically evaluate your business.* SmartBiz Advisor also suggests ways to help you improve your credit and strengthen the financial health of your business as needed. Read feedback from real SmartBiz Advisor users and sign up here.