It’s easy to see the importance of controlling your small business’s cash flow, but oftentimes the challenge is where to begin. The answer is inventory management. Inventory management is important for any retail business, no matter the size. With the right management, small businesses can minimize costs, prevent losses, maximize efficiency, and get the most out of their supply chain.
Inventory management is a broad subject, but it touches on several key business operations. Here are five breakdowns:
- Receiving shipments of inventory
Make sure that your inventory is delivered fully intact and undamaged, in the quantities and at the quality levels that were promised. With consistent inventory management processes, you can avoid getting shortchanged on your inventory orders, and avoid receiving damaged or incorrect products. This will save money for your business and improve your overall efficiency.
- Storing inventory
Whether at your own small business’s location, a warehouse or an offsite fulfillment center, inventory storage is important to get right. Make sure your inventory is safe from damage or theft, and that it is easily traceable and shippable from the storage location.
- Making inventory projections
Just like your business needs to make estimated sales projections to develop a sense of how many sales you are going to make throughout the year, you also need inventory projections to estimate your necessary inventory levels. Estimate how much inventory you will need based on prior sales and seasonal demand. Be prepared to adjust based on shifting customer preferences and new sales trends.
- Inventory Tracking
Good inventory tracking tools and practices will help you get an accurate count of the amount of inventory in stock and make adjustments to prices as needed. Accurate inventory tracking can also help you avoid losses or miscalculations. You paid for the entire inventory, so you should know where all of it is at any given time.
- Inventory Analysis
By looking at your inventory data, you can get valuable insights into how your business works, what sells (and what doesn’t) and how to make improvements along the way. For example, by analyzing your inventory data, you might realize that you need to significantly change the process of buying inventory from certain suppliers. Or you might consider investing in buying more inventory at a slow time of the year when your cash flow is lower than usual.
Inventory Management Software
One of the best ways for small business owners to get smarter about inventory management is with the help of inventory management software. Instead of using spreadsheets or manual pen-and-paper methods to keep track of inventory, inventory management software gives your business better visibility, up-to-date tracking information, and immediate insights into your sales performance.
Inventory management software doesn’t have to be too costly. With today’s great cloud-based business tools, there are a variety of inventory management apps that enable your business to get just the right level of support and features that you need for a smaller business. Check out these three inventory management tools.
This inventory management system gives your business a comprehensive way to track products and purchase orders, track inventory by location, store customer data in one place and add relevant taxes and discounts to customer orders before processing the sale.
This is inventory and order management software that integrates with QuickBooks Online, reducing data entry errors and saving time. It works from any web browser on any device and has support for multi-location inventory. This system offers comprehensive features to help you automate your business, whether it’s issuing purchase orders or tracking items.
Stitch Labs is an inventory management tool that helps your business save time and money by keeping track of your inventory (quantities of each product, etc.), ensure accurate order processing, automate the processes of ordering new inventory and fulfilling new sales and making your business into a multichannel sales organization.
Once your small business has integrated some inventory management principles (and perhaps some software tools) into your daily operations, you can start to look to the next level: inventory optimization.
Inventory optimization is the process of figuring out exactly how much inventory you need to meet customer demand – but without incurring unnecessary storage costs or creating unnecessary delays in fulfilling customer orders.
It’s important to strike the right balance between “too much” and “too little” inventory. Too much inventory means incurring extra costs of buying, shipping and storing inventory, which reduces your cash flow. Too little means running the risk of disappointed customers and missed sales due to running out of popular products.
With inventory optimization, you can develop a deeper, data-driven understanding of your business:
- Which products or categories account for your biggest sales totals
- Which patterns or fluctuations of customer demand are affecting your sales
- How it relates to your business accounting
Inventory is the stock in trade of every small retail business – your inventory is your business. So why do so many business owners neglect to pay attention to the fine details of the inventory on their shelves?
It doesn’t have to be this way. With smart inventory management, inventory financing, and next-level inventory optimization, your small business can save money, satisfy more customers, and operate with greater visibility.
The SmallBizRising Blog is designed to be an educational content hub pulling information, best practices and practical advice for the small business owner and features topics including accounting, marketing, technology and more. Be sure to subscribe to stay up to date with new content as it is posted. The blog was created by The Neat Company and receives contributed content from a group of contributing companies that provide technology, services and solutions to small businesses.