Managing your inventory may be a tedious process, but it has major consequences if done incorrectly. Often, poor inventory management can not only be expensive, but can also cause slow order fulfillment, increased vendor interest rates, customer service issues, and more. But, inventory management doesn’t have to be costly or complicated – it just has to be organized. Here are five tips to help you manage your inventory effectively:
1. Don’t Overstock
Overspending on inventory is easy, but it’s not a real way to offset the fear of products going out of stock. While buying volume can reduce cost per unit, it also means that your cash flow is restricted until those items have been purchased. It’s not just the cost of the item itself, storage and warehousing prices can be high. Plus, if you don’t sell inventory at the right point in time, you could end up discounting it just to get rid of it.
So, how do you navigate this? Start to make predictions on how much you’ll actually need and when. The best thing to do is look at previous monthly sales to find any trends or seasonality. Identify the less obvious patterns and the end-of-month spikes. Or, if you’re just starting out and don’t have data to look at, start investigating your competitors.
2. Track Your Inventory
Once you have stock, you need to be able to track it. Unfortunately, opportunities for miscounting stock are everywhere – from receiving the shipment, fulfilling orders, or even staff use. Don’t forget to account for broken and damaged goods as well.
An electronic inventory system, like Xero or QuickBooks, is the best way to get on top of your inventory management. Even better if it’s linked to your point-of-sale (POS) software system. You can then use the system to complete random spot checks to ensure the inventory count is correct and you have adequate stock.
3. Have Clear Priorities
Tracking your inventory lets you know what products are customers’ favourites and what products generate the most revenue. Generally, 80 percent of your profits will come from 20 percent of your products, so take the time to analyze your sales, inventory, and processes. Once you do this, focus on the items that have the biggest return on investment.
4. Don’t Allow Your Vendor to Restock Products
It can be tempting to allow vendors to stock and reorder products. After all, it saves you time and staff costs. But, if you don’t monitor their orders properly, it can result in overstock or inventory loss due to miscounting or paperwork. It may also result in products not being rotated on the shelves, meaning expired inventory.
To avoid this issue, stay in control of your inventory. You should be the one who knows what’s coming in and going out of your business, and not relying on a third-party to affect your profits.
5. Have a Back-Up Plan
Imagine taking all this time to perfect a system, only for it to be lost. Concerns over server failures or stolen computers should be addressed and prepared for.
The first rule for all business data is to always have a backup. It could be a USB, Dropbox account, or an external hard drive – just make sure you have something. Prepare for the worst-case scenario so you don’t let your hard work go to waste.
Small Business BC is Here to Help
SBBC is a non-profit resource centre for BC-based small businesses. Whatever your idea of success is, we’re here to provide holistic support and resources at every step of the journey. Check out our range of business webinars, on-demand E-Learning Education, our Talk to an Expert Advisories, or browse our business articles.
