Managing and organising inventory is one aspect of running a small business that takes up a lot of time and effort. Inventory Management is a critical part of any successful business and should be done effectively on a regular basis to ensure you’re on the right track. If you have an organized inventory management in your business, will have the answers to vital questions that will keep your business running in good condition such as:
How has your small business been performing? Have you had enough stocks available when you needed them? Were there missed opportunities for sales because an item was out of stock? Or did you lose money due to excessive inventory?
This article will discuss innovative ways to manage your inventory and go over some doable best practices to manage your inventory effectively in your small business.
What is Inventory Management for Small Businesses?
Running a small business involves many critical details that are direct factors for its growth and success. Seated right on top of this list is inventory management.
Inventory management is an integral part of any business’ management that aims to always be ready for sale by having the right products in the right quantities at the right time. If you do this effectively, you don’t have to worry about going out of stock or funds being tied back due to excess stock. You can track your inventory real-time and streamline the manual count process.
If you’re not diligent and organized in managing your inventory, your stocks can easily turn the accounting process into a nightmare, hindering you from making the most out of your sales process. With good inventory management, you can also ensure that your products are sold in time to avoid spoilage, damage, or datedness.
1. Chuck out old and unused inventory
Step one is to keep an organized warehouse of inventory at all times. Clear out additional work for yourself by getting rid of old stocks damaged or not in use anymore. Many small business owners have a hard time letting go of old and damaged inventory that they have previously spent money on, thinking they might still be able to sell it. If all is said and done, assuming the mark-down promo strategies did not do much for these items, it’s best to get rid of them and have a clean and tidy warehouse/ storage.
If your workspace is cluttered with unused or damaged stock, it’s a smart move to start decluttering bby getting rid of them.
Pro Tip: When you throw out or donate damage/unsellable inventory, keep track of it in the inventory adjustment feature of your POS with a valid reason like broken or wastage. This extra step might seem time-consuming. It is if you do it manually, but with POS inventory management, keeping a tally of wastage stocks is a breeze.
Ultimately, this practice will reduce your time spent updating your inventory because you won’t need to account for items that aren’t selling anymore.
2. Fine-tune your forecasting.
Improving your inventory forecasting to stay accurate is vital if you want to keep an organized inventory. Your sales projections should be based on parameters that include market trends, historical sales figures, predicted growth, and the economy, promotions, marketing efforts, etc.
Small business owners use the Dashboard app of modern POS to check all inventory movements and sales information. This way they can maintain an accurate forecast of the business and have a good understanding of your sales performance based on facts and real-time data.
3. Use the FIFO method (first in, first out)
Follow this strict rule: a new product doesn’t come in until the old product goes out.
Goods should be sold in the same chronological order as purchased or created. This is crucial for perishable products like food, plants, and cosmetics. For example, a grocery owner must be aware of the stock goods and apply FIFO methods to improve his shop's inventory by reducing damaged or spoiled goods kept in the warehouse for too long. The FIFO approach still applies if you sell nonperishable goods because items that sit around for extended periods are prone to damage or quality depreciation.
The best way to apply FIFO in your small business’ display rack is to replenish new items from the back, so the older products are placed right at the front.
4. Identify low-turn stock
This rule applies in connection with the FIFO method. If you have stock that hasn’t sold in the last six to 12 months, that’s when you decide to stop stocking them. You can consider other strategies to get rid of that stock — like a special discount or promotion. The purpose of good inventory management is to minimize the chances of having excess supply because excess stock wastes both your capital and space.
5. Audit your stock
Business owners should make it a periodical habit to count their inventory to ensure that what they have in stock parallels what they think they have. For this, you can apply different techniques, including an annual, year-end physical inventory that counts every single item you have in hand. This can be most useful for products that are moving fast or have constant stocking issues.
6. Track your stock levels at all times.
Have a solid system for tracking your stock levels and prioritizing the most expensive products. Effective POS with inventory management systems can save you time and money by doing the bulk of the work by tracking your inventory count in real-time, which means while your sales are ongoing. Good inventory management has a feature that will notify you when your stock is running low and in need of replenishment.
7. Track best sellers first.
There is an 80/20 rule among small businesses. This means, 80% of your sales will most likely come from only 20% of your merchandise. That means you’ll have a few items that are your main money-makers.
When taking a manual inventory, starting with the items that experience the most change is wise. Track your best sellers when you have fresh eyes and match the number on the shelf to the number on your software. Once you’re through the top 20% of your inventory, the rest will be much faster to sort through.
Pro Tip: Make sure to keep these best sellers in a primary storage location where they can be easily reached and not tucked away at the back of your storage space.
8. Find a helpful cloud-based POS
Look for a POS with a built-in inventory management feature and real-time sales analytics. Loverse POS Inventory Management connects directly to your point of sale, so your stock levels are automatically adjusted every time you make a sale. With this, you can receive daily stock alert notifications, so you always know which items are low or out of stock.
Business owners grow tired because they’re trying to manage sales, update social media platforms, file quarterly tax paperwork, manage inventory, and keep the accounts and ledgers balanced. When your business hits an unanticipated growth stage, and things start to seem like it’s getting out of hand, a trusted POS with a built-in inventory management system will do wonders for you by streamlining and automating the process.
Inventory Management for Small Businesses
We hope this article inspired you to revamp your small business inventory management system. Sometimes all it takes is a little planning and organization to get started. It’s helpful to put these habits into place when a business begins, but no time is too late to improve upon a system that is no longer working for your business.
Edited by Chooli