On the face of it, inventory for a business and maintaining inventory should be simple, right? It seems to be a balance of what items a business has in stock, versus how many of them they sell.
However, as any business owner will tell you, whether you run a pet store or a café, it’s so much more complicated than that. Inventory and inventory management oversee everything from products in your warehouse or stockroom, to any ingredients or raw materials that are needed to make those products, and of course, broken products, out-of-date products, and deliveries.
Inventory management is much more than what you have in stock. It’s also being able to predict what you’ll have in stock, so your business can ensure that there’s enough to meet future demand. This part is crucial at busy times of the year, like Christmas. Of course, there’s also the issue of having too much or too little stock, which can result in your business losing money.
Luckily, there are ways to simplify the process of inventory management for smaller businesses. So, read on for a quick and simple guide to better inventory management practices which will save you and your team both time and money.
Why Is Inventory Management Important?
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Irrespective of whether a business is setting up a brand-new business, or has been running one for years, they’ll need to track their inventory to better manage their costs and have an ample supply of products to ensure they can meet customer demand. Ergo, they need to have an effective inventory management system.
As stated before, poor inventory management can lead to financial losses for businesses. A business owner may buy too much of a product or item that doesn’t sell, or they may buy too little and miss out on income via sales.
When you’re a small business, money is usually tight so, it’s wise and better for businesses to invest in an effective management strategy to make sure they keep costs low. So, with this in mind, what are some of the best tips for managing an inventory?
Use The Right Type For Your Business
There are different ways to manage the inventory for your business. One of the most common options in 2024 for inventory organization is to look into inventory management software, which, according to Sortly, automates many of the processes required to keep your inventory ticking over as it needs to.
There are, of course, options for smaller businesses for inventory management that don’t involve software, such as manual inventories, where you keep track of your stock with a spreadsheet. This method is ideal for smaller shops and online businesses.
If your business is larger, you may want to invest in a more complex inventory management software option that has features like customization, inventory organization and even syncing with offline access.
Aim For Accurate Forecasting
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A core part of managing inventory accurately is forecasting. There are many things to take into account with inventory forecasting, such as historical sales of an item, market trends, the time of year (the Christmas period is a big one!), and even technological advances. You’ll also need to be aware of demand shifts and even the state of the economy.
Luckily, in 2024, you don’t have to make these predictions by yourself. There are many business-friendly artificial intelligence or AI programs that can help you make the best forecasting predictions for your inventory. AI is becoming more affordable for many businesses, so it’s well worth looking into.
Aim To Reduce Low-Turn Stock
It may be the case that there are some pieces of low-turn stock in your stock room or your online inventory. These are simply items of stock that haven’t sold and are no longer in high demand.
Why is it important to identify them? There are a few reasons: for one, it prevents you from ordering the item again, which can cause your business to lose more money. It also helps you to identify trends in customer behavior. Lastly, it helps you to identify which items can be put on sale to get rid of the low-turn stock at a profit.
Conduct Audits
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You’ll need and want your inventory management system to be accurate. Making sure that it is will require you to have the right software in place, as well as staff who are trained in the right practices and policies.
It’s the reality that, despite how accurate inventory systems are, the stock levels will (and should) need to be checked by a human. So, you’ll need to conduct inventory audits, usually once or twice a week, depending on your level of stock rotation. This will help you to better manage your inventory and be confident that you have all the right items in stock.
It can be worth implementing a system of auditing via cycle counting, which can help you to find any potential errors in the data, as well as spot any waste or low-turn stock that may have gone under the radar.
Use POS When Appropriate
Along with inventory management software, it’s well worth also having a backup in the form of a point-of-sale system. These are ideal for businesses like restaurants, which may get through multiple items of stock to create a single meal. A POS system will allow you to track your inventory and stock in real time and will also automatically update the levels, as well as the costs.
Many POS systems can be integrated into inventory management systems, which will help you to manage the items of stock that are coming in, and the items that are going out. In some cases, you may be able to purchase these systems together, which will usually be on a subscription option.
This combination of automated options will remove all data entry errors and will allow you to have improved reporting on what you have in stock. Again, this saves time and money and allows you to focus on the more important parts of managing your business, such as customer service.
