July 31, 2022

Top 5 Tips for Managing Your Small Business Inventory

Naveen Shayan

LedgerMax specialist

Are you managing your small business inventory well? Do you have your desired products available in stock at the right time or do you miss sales opportunities due to lack of stock? Or on the contrary are you losing money owing to excessive inventory? If your answer to any of these questions is YES, then sadly, you’re not managing your small business inventory accordingly. But don’t worry! Here in this article we will discuss some amazing tips to up your small business inventory game. Let’s start with discussing what is meant by inventory management.

What is Inventory Management?

It is basically a procedure to maintain the required products in appropriate quantities in stock; so that they can be sold and delivered to the customers on time. If managed properly, a small business inventory can prevent losses that occur due to excessive inventory, lack of stock and unsold items. Thus, effectively managing a small business inventory leads to a good increase in your revenues too. 

As a small business owner, you might know that the key purpose of maintaining an inventory is to run business procedures with an uninterrupted supply of resources. Thus, in order to complete this task effectually, your business must attempt to look for an optimum point between excessive and insufficient stocks, devoid of getting without stocks ever. This efficacious stability will help in improving productivity and cash flow, and will also aid in keeping your business run effortlessly. Let’s now discuss what happens when you have excessive or insufficient inventory:‍

What happens when you have Excessive Inventory?

The point of having a well-managed inventory is to have the particular item/product available when there is a requirement, without amassing more than what you can utilize. It is required to keep in stock a quantity that can be used by your business in a rational timespan. As a matter of fact, one can refer to the industry average for the turnover rates of an inventory that makes valuable target amounts and strategies. Though, it is significant that your business keeps up sufficient materials without creating a mess to achieve an average target. A disadvantage of purchasing and storing excessive inventory is that it makes your cash flow suffer for the reason that your cash is occupied in materials that are lying in your store vacant instead of being accessible for instant requirements like payroll and rent. Thus, more than required inventory can also put you under the handling and storage expense, and take up space which could be employed for better things.

What happens when you have Insufficient Inventory?

Quite the reverse, if you are short of the required inventory, you wouldn't be able to cater the requirements of your customers on time. This will eventually result in losing your customers as well. This kind of business loss can not only bring about a particular day's sale loss but can also result in losing customers forever if they could find better alternatives who they find more reliable. While it may appear that storing less inventory can save you some money; the reality is, it can cost you a lot in terms of customer loss and sales.

Top 5 Tips for Managing Small Business Inventory 

All businesses whether small or big are required to keep up their inventories in order to manage their expenses and establish that they have sufficient products in stock to meet the demands of their customers. However, it is integral for small businesses to manage their inventory in the most reliable and cost effective manner. Following are some tips to do this:

1. FIFO is the best choice:

FIFO strategy is perfect for inventory management. Items that you bought or created earlier should be sold first. This means that the item that came first in your inventory should also go out first too. This is considerably more significant when you have goods like food or makeup in your inventory. Besides FIFO is best for other items as well because products lying in the store for a longer period can be damaged or become outdated.

2. Forecasting is the key:

It is important that you start polishing up your forecasting and estimating skills. Precise forecasting is crucial for your small business. The sales calculations you estimate ought to be established on factors like past sales records, economy, expected growth, market tendencies, marketing endeavors and promotions etc.

3. Stock Auditing is helpful:

Ongoing stock auditing is very important for managing your small business inventory effectively. You are required to count the available items in your inventory in person to ensure that you actually have the things in stock which are on paper. In this regard, you can use various methods like physically checking your inventory every month or two and recording what needs to be bought further and what shouldn’t. 

4. Identifying idle stock is useful:

For running your small business successfully, it is vital that you identify the items that are in stock for a longer time period but are not being sold often. So, if you have any such item that is lying idle in your inventory for month; it is recommended that you stop stocking them anymore. You can try selling those items by offering promotions or discounts given that they are burdening not only your capital but also your space.

5. Cloud-based Software is the best solution:

Investing in cloud-based software like LedgerMax is the best thing you can do to your small business. This software perfectly manages your inventory and automatically adjusts your stock levels so that you always know what you have in your inventory with a few clicks. 

‍A properly managed inventory can help you in accomplishing your small business goals. All you have to do is make fruitful arrangements for handling and substituting stock. Thus, it is important that you form an inventory measurement standard for ideal inventory levels on the basis of sales histories. Also, classify the most important points upon which you must rearrange, and set up manual or automatic arrangements for connecting with your purchasing division whenever the inventory levels go down from these points. Moreover, it is very imperative to develop strong associations with your vendors and suppliers who can help in resupplying the required item swiftly whenever you see an unexpected flow in demand. Likewise, it is best to pay additional to refill your stocks speedily when there is urgency, only if you go for less costly selections, and do not mostly let your inventory levels fall into risky levels often. In this regard, an automated system like LedgerMax helps you maintain and control your inventory even if you have multiple warehouses. With LedgerMax inventory management system you can never go out of stock.

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