Trying to keep up with inventory in your small business can become a losing battle without some smart organization. The worst that can happen is when you run out of a popular product and have to tell customers you won’t have a new order in for a while. You can run into similar problems if don’t properly record things like SKU numbers, barcodes, or product specifications. This is why inventory management is important.
All of these and more are typical inventory problems for small businesses like yours still in the growth stage. Lack of attention to your inventory can quickly set you off on the wrong foot with a buyer. Considering you’re still trying to create a reputation, not having new products available when you say they will be available can quickly insinuate unreliability.
Here are some tips on managing your small business inventory to avoid confusion while keeping you and your customers continually informed.
15 Tips for Inventory Management
Tip #1: Understand Your Product Types
If you are a new business, maybe you are still learning about the four common product types needed to properly manage your inventory. The most basic is an “item”, a product sent to you that doesn’t require special packaging and selling as is on the shelf.
It’s possible that most of your products are like an item. Although you also need to know about an “assembly”, meaning a product requiring assembly in the warehouse before being delivered to you. Plus, you have a “family”, a product with different sizes or other variants.
Another option is a “pack”, otherwise known as a product bundle. These products usually get sent to you in a case pack, then unpacked individually for singular sale.
Tip #2: Forecast the items you need
In order to forecast your sales and therefore, the items you need to stock, take a look at your past sales figures in your income statement. Don’t forget to consider factors like market fluctuations or seasonal trends.
Tip #3: Use the FIFO approach (First In, First Out)
Items should be sold in the same chronological order as they arrived. This is especially important for perishable products like food and flowers. The easiest way to apply FIFO in your warehouse or kitchen is to add new items from the back so the older products get to be at the front and at hand.
Tip #4: Identify the stock that isn’t selling
If you have stock that hasn’t sold at all in the last few months, get in touch with your supplier and close your contract. If it’s not a perishable product, you can organize a sale to get rid of the remaining stock. This will increase your profits and free room in your warehouse.
Tip #5: Pay Attention to SKU’s and Other Identifiers
A Stock Keeping Unit is a vital part of your inventory management, and it’s your overall identifier for finding a product quickly. However, it’s not the only thing you need to manage your inventory record.
First, it’s important to keep your SKU’s in an internal database to quickly look up an item when it’s requested by a customer. Using an SKU also helps differentiate between a product sold by a competitor.
Don’t forget about using barcodes as well, especially if working exclusively in a brick-and-mortar small business. These are usually known as UPC numbers that you scan to quickly locate a product for a customer.
Remember to put together a system listing all product specifications. This should include product names, the SKU/UPC number, description, color, size, price, weight, and dimensions.
Tip #6: Use inventory management software
With the proper software, you can receive alerts that let you know when you’re running low on a certain item and it’s time to reorder it.
Tip #7: Track your stock levels regularly
Have a solid system in place for tracking your stock levels. Besides inventory management software, you can assign this task to a couple of your employees who can check your stock levels every two days or weekly, depending on the nature of your business.
Tip #8: Check your equipment
Your equipment and machinery go hand to hand with your inventory, depending on the type of business you run. If a piece of your machinery breaks down unexpectedly, you’ll have to allocate accordingly part of your budget to the repairs, which could affect the amount of cash you assign to replenish your stock. As well and monitoring your inventory, performs regular machinery controls to make sure everything works smoothly.
Tip #9: Perform regular quality controls
Quality controls are essential to identify damaged goods, asses any problems if necessary, check the correct labeling, and guarantee the high quality of the products that your customers will receive. The lack of close quality inspections may lead eventually to bad reviews that can damage your reputation, and that’s the last thing you want as a small business owner.
Tip #10: Hire a stock controller
If you have a lot of inventory, you may need to hire a person responsible for the whole inventory management process. A stock controller gets in touch with suppliers, takes care of the orders, receives, inspects and arranges deliveries, etc.
Tip #11: Organize your inventory
Many businesses find it useful to group their inventory items into categories (like A, B, C., etc.). You can sort your stock depending on the type or use of the product, price, size, etc.
Tip #12: Consider drop shipping
Drop shipping is an increasingly popular technique that allows you to sell products that you don’t stock in your warehouse. A wholesaler or manufacturer (usually overseas) is the one who carries the inventory and ships it directly to your buyers when they buy from your online store. This can save you a lot of the costs involved in storing, managing and controlling your inventory.
Tip #13: Study the Key Metrics
Tracking customer interaction and customer performance are just as important as keeping an inventory database of what you have. Put together a reliable metrics platform showing every detail of what’s been sold, including in another store if you have one.
You also want to know who buys your products so you can better target your inventory to a particular demographic.
Real-time inventory metrics are becoming more popular now to make smarter and faster decisions on what to replenish and when.
Tip #14: Perform Daily and Monthly Audits on Inventory
Auditing your inventory on a daily or monthly basis is the smartest thing you can do to avoid any discrepancies. Without an audit, some of your inventory could go missing, become stolen, or damaged. Not keeping up with what happens to your inventory could create chaos in your records and major losses due to too much second-guessing.
It’s usually acceptable to do this at least quarterly. Regardless, when you start getting loads of orders daily, it’s best to audit every business day. Doing so helps you speed up product deliveries to your newest customers.
Tip #15: Subscribe to the Camino Financial Newsletter
Our weekly newsletter contains valuable information and tips on business management, accounting, marketing, technology and more. Our goal is for you to improve your financial performance so you can Access better opportunities and grow your business.
Proper and efficient inventory management starts with the right amount of funds to stock your business. If you are considering buying more inventory to assist more customers and grow your business, a business loan can be the solution. Camino Financial can help you get a small business loan so you can achieve your business dreams. If you are ready to see your business grow, simply fill out the application to get an instant quote of your potential loan.