Small business inventories store collections of raw materials, components, equipment, goods, and products you use for production, sale, or distribution. Sufficient stock levels that meet customer demand rely on good inventory management.
Establishing efficient operations and forming positive supplier relationships maintains excellent service. Review four actionable tips on good inventory management.
Perform Regular Audits
Quarterly or annual audits ensure your financial records, such as sales figures, match your inventory numbers, like stock quantities. Findings should reveal discrepancies like theft or damage and highlight over- or under-saturation of specific goods and materials. Small businesses should consider these audit methods:
- Stock take: involves scanning items and bar codes to compare records of what your inventory should hold.
- Cost analysis: Review freight, overhead, and labour costs to identify production expenses, payroll, the value of goods received versus the paid amount, and utilities like rent and electricity bills.
Optimise the Ordering Process
Efficiently fulfilling orders means you have a more accurate representation of your stock. Just-in-time ordering, for example, means you forecast customer demand and only order materials and goods when needed, avoiding overstocking. You can calculate reorder points to identify demand based on sales and lead times. Automating reordering processes ensures popular or necessary items never drop below critical stock levels, saving you time.
Use Inventory Management Software
User-friendly inventory management software such as Zoho, Xero, and Quickbooks Online saves valuable time and resources initially spent updating inventory figures manually on spreadsheets. You can integrate a cloud-based system, accessible from anywhere, with your ecommerce sites, so customers can select products based on their availability, streamlining the ordering process. It’ll share real-time stock-level reports and highlight hot items, too.
Consider the FIFO Method
First-In-First-Out (FIFO) is an inventory valuation and management technique where you sell or use items in order of their production or acquisition (starting from the oldest) first. You’ll base the cost of goods based on their age or condition. For example, a small grocery store will display older perishables like fruit at a lower price to prevent waste and shift all stock.
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