How to Organize Inventory for Small Businesses

Cody Cromwell
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What Is Inventory Management?

The purpose of inventory management is to ensure that there are enough products on hand to meet the needs of customers at a given period of time. Inventory is a vital component of any company’s financial health, and it is typically the first part of the business to be affected during difficult economic times.

To handle their inventory effectively, businesses need to have a solid inventory management system. Key aspects of an inventory management system include:

Standardized procedures. Adherence to standardized procedures can help ensure that accurate inventory counts are recorded and that any material that is out of stock is promptly removed from the system. This means that cash flow and cost of goods sold expenses will be accurate and cause minimal fluctuations in the profit margin.

Accurate inventory calculations. Because inventory management is a business’s first line of defense against financial losses due to diminished supplies, it’s essential that the inventory count accurately reflect the amount of inventory on hand. Businesses can help minimize the chances of inaccurate inventory counts by using inventory management software to generate accounting reports for both physical and financial inventory.

How Inventory Management for Small Business Works

Having control of your inventory can be a bit of a challenge for small businesses. You want to get the inventory you need, but not purchasing too much. If you don’t have the money to invest in inventory management software, you can learn the basics of inventory management for small businesses from the simple principles of inventory management.

Employee Incentive Programs
Create an employee incentive program that rewards loyal customers and workers. Incentives can include merchandise, tickets to a game, open bar at the annual picnic, miles in a vacation hotel or even the opportunity to display your company’s advertising. Running a loyal customer incentive program teaches employees to focus on good service for your customers.

Repeat Customers
As you develop your website and capture new customers, it’s important to work with repeat customers. Repeat customers tend to have small orders, so the more business you get from them, the more money you make.

Be Flexible
As your business grows, you can update your inventory inventory in order to accommodate increased sales and orders. Understanding building inventory is key to growing a small business. Knowing your inventory…is a lesson in building sales.

Organize Product and Vendor Information

Every business juggles ledger books, computers and slips of paper, trying to keep their inventory, sales and expenses organized. Inventory is a major part of keeping a small company running smoothly, and it’s easy to get a system in place that turns into a mess very quickly. Small business owners need a system that’s easy to follow and keeps things organized, but doesn’t get too complicated. Continue reading for tips on organizing inventory, including a quick tip, a no-cost option and a low-cost option.

Quick Tip: Organize inventory and inventory information. Keep all necessary records in one place.

Low-Cost Option: Use a spreadsheet or database to categorize inventory.

No-Cost Option: Record inventory information using an Excel spreadsheet.

Let’s look at each of these options in more detail.

Create and Submit Accurate Purchase Orders

When asked to give advice about how to be a successful small business owner, one of the most common responses is: ‘Organize’ your inventory, and then ‘substitute standard terms and descriptions to give orders.’

This is certainly possible, but not all companies have the resources and time to create an inventory system, so the most logical way to ensure that orders are filled properly is via purchase requisition.

A purchase requisition is an electronic document that is created using the Microsoft Word template. You’ll need to use Microsoft Excel to add any additional information about the product. Once the variables are filled in, the result is a formatted electronic document that you can submit to your vendor for purchase.

This type of order is different from a PO because a PO is filled out entirely by an employee, while a PQ is completed by an employee or an owner. A PO is an outgoing order while a PQ is an incoming order.

This document is also different from an electronic PO, which is an order that’s completed entirely electronically. Electronic PO’s are easily repetitive, so a purchase requisition is a better option.

Receive Inventory Orders Accurately

You’ve got a shipment on the way and want to confirm your customer’s order with detail. The customer has provided you the weight for the product but not the dimensions. The XYZ print software can organize inventory and receive orders like this. You can weigh the items, measure the lengths and widths, and save the data.

With 1.15 billion active users, the XYZ print software has been trusted by businesses worldwide. Its cloud print technology is adopted by printers to send jobs directly to printers.

Additionally, the XYZ print software allows you to create a custom template for your invoices or receive shipping notifications from your inventory management software.

Using the software, you can quickly find the inventory and keep track of what’s in stock, when it’s reaching its expiration date or if it’s running out.

Moreover, the print and scanning software in the XYZ print software automatically create a Bar Code in the order, which makes it easier to print invoices and track running costs.

The test print quality is similar to laser printer and doesn’t require a lot of maintenance.

However, the ink type will not clog up if you don’t wipe off the ink manually.

Tag and Label Inventory

If you’ve ever been in business, you know that inventory is something you need to keep an eye on. While you want your inventory to last, you also want to prevent unnecessary expenses due to damages or losses. So how can you make sure your inventory stays in good shape for the long term?

This is where tagging and labelling your inventory comes into play. Not only can tagging and labelling help you identify your inventory, but it can also help you pick out the items that you want to appear on your inventory reports.

Editions of QuickBooks® have a built-in inventory tagging feature that automatically tags your inventory items with a bar code. However, tagging your inventory items manually can help you avoid manual errors.

One way to tag your inventory items is to use paper tags and a label maker. You can write a short description of the item on the tag, so you know what it is when looking through your database.

You can also use chip tags, which can be installed on your cartons. Chip tags are affordable, durable and flexible, so they’re ideal for easy organization. Tip: be sure to hand write the description on the chip tag so you can read it easily.

Track Inventory as It’s Sold

You can’t accurately represent the amount of inventory on hand if you don’t know how much inventory you’re going to sell. That’s why keeping track of what’s sold is so important if you’re running your own business. While you can use a spreadsheet, there are a few inventory management software programs that make it easier.

Software like Quicken and Quickbooks, include inventory features that keep track of what’s in the store and what’s been purchased. –Quickbooks Pro” packages include a barcode scanner to make it easy to keep track of what’s on the shelves. This feature is especially helpful for businesses that buy from wholesalers.

Using a spreadsheet to track inventory requires you to enter each item as it’s sold. That’s a lot of manual work that can slow you down and get repetitive. Using inventory software eliminates the need for manual recording and provides you with an accurate picture of what’s on hand at all times. And for busy small business owners, that’s invaluable.

Take Regular Physical Inventory Counts

Take, for example, the Example Products. The automated, comprehensive electronic system can help you keep track of this inventory.

You could also report damage to an independent third-party. But the end of the day, the main issue here is to ensure that you have a physical inventory of the quantity and condition of product.

There are myriad third-party inventory management software systems available, but oftentimes there is no substitute for a second set of eyes.

Breaking down the process into its key parts: [1] [2]

This is literally like taking a photograph of every product. The main purpose of this process is to identify the replacement costs of missing items and low-quality or defective products.

A good inventory system will also reveal over- or under-stocking issues. If you have a little time and energy, you can even work on reducing your inventory to the bare minimum.

With any sort of physical inventory, the first step is to take a simple physical count. It doesn’t need to be a complicated process, and it doesn’t need to take a long time.

The second step is to add the values from your end-of-the-day reports to the physical count. This will give you the total dollar value for the products in your inventory.

Reconcile Inventory Differences

Are your stock numbers off? Did another employee take something home? Did someone win the lottery and buy up all your inventory in a single weekend?

These are just a few of the common problems that crop up when keeping track of inventory. The good news is that small business owners can use QuickBooks Inventory to keep track of virtually any inventory they’re using.

The basic idea is that QuickBooks manages a running inventory of each of the items that you’re selling for you so that you don’t have to. You simply choose that item from your QuickBooks inventory and specify the quantity you have on hand.

The great thing about this process is that QuickBooks Inventory— and thus the entire business and costing system – takes into account all the costs that go along with producing that inventory. How much does it cost to buy the inventory? How much does it cost to get the inventory into the store? What about the costs of keeping the item in inventory for a whole year?

These costs are then deducted from the inventory at the end of the year to get the Net Operating Income. The Net Operating Income is the amount of Net Profit generated by the stock. This value can be compared to the initial investment to determine if the stock is profitable.

Organize Your Stockroom and Warehouse

Whatever you’re selling, a well-organized stockroom and warehouse minimizes the chances of a customer getting ripped off. Improper organization will lead to stock shortages and confusions among your customers, which will result in bad word of mouth and lost business. So before going about setting up an open-air shop, you should put in place the necessary organization systems to keep track of your products. Don’t just dump your inventory in haphazardly, even if you’re down sizing!

To come up with a set of systems, the first step is to assess the constraints of your shop and then customize the best system for your needs. Some businesses have multiple departments, while others are open-air spaces. It’s best if you can work with a third party to assist you in assessing your needs and developing a suitable system.

Warehouses and stockrooms can have various dimensions and can be open or partially enclosed. Keep in mind the physical and financial constraints and draw out some basic plans.

Once you’ve gotten a picture in your head of the ideal system for your business, you can proceed to set up the system and find a space where it will fit.

After you’re done setting up your system, remember to keep it in shape by performing regular maintenance checks.

Best Practices for How to Organize Inventory

Starting a business is a journey, and part of that journey is the inventory you need to create and maintain. From books to electronics, inventory is necessary to sustaining your business and fulfilling your customer requests. Unfortunately, many people end up overbuying, under ordering, and overstocking.

In this post, we’re going to discuss best practices to organize your inventory for small businesses. Also, we’ll explore attributes of products to consider when establishing your inventory.

Using the following best practices you can keep your overall inventory organized. These best practices can help you establish small business inventory from the ground up:

Establish a proper and reasonable inventory

It can be easy to think you need many more products than you actually do.

However, you don’t need to have unnecessary products or sell things that aren’t as profitable as others.

Additionally, you don’t want to overbuy used items or out-of-date products, because you’re going to have to sell them.

Consider inventory while designing your store

Your inventory can regulate how long items stay on the shelf, whether they make your sales goals, and whether you’re overstocked.

Use Forecasting to Stock Accurately

Forecasting is the act of planning and predicting your inventory levels. In any business, inventory management is the key to lower costs and to ensure that the right products are available at the right time. This is because one of the most important costs of any business is the cost of inventory. If you have too much product or product sitting too long on the shelf or in the warehouse, then these are costs that you can’t account for. This is why forecasting inventory levels is so important.

Let’s say that if your shelves are 50% overstocked, you’re likely to incur a cost when it comes to excess inventory. When forecasting inventory levels, you’re going to look at the previous month’s sales and compare it with the inventory currently on the shelf. In addition, you’re going to look at the sales that you would like to make for the next month, along with the amount products that you’d like to have on these shelves.

For example, if your current inventory levels are close to the amount recommended by the industry, and your sales for the next month are about the same, then you’ll want to forecast a slight increase in inventory to about 60% to maintain this average.

Set up Low-Stock Alerts

An online inventory and order status tool like Inventory Organizer accurately tracks inventory levels of your stock. It keeps out-of-stock alerts, and notifies you when stock runs low. You can then rework your shipping methods to deliver on time.

Multiple Item Tracking
One of the most frustrating parts of inventory for small businesses is not knowing whether or not some items are carrying over into the next batch. Inventory Organizer has a unique feature known as Multiple Item Tracking. As a business owner, you can activate this at any time. Essentially, this allows you to customize your item level counts to allow you to allocate specific items to specific orders.

Multi-Step Processes
Electronically completing receivables and shipping data can reduce the work load significantly for your employees. Work can be divided up and completed in multiple steps. With time stamps and eCheck counts, it is easy to see which shipments have not yet been completed.

Customizable Reports
There are plenty of reports for advance notification of your inventory gaps. A low stock alert email will be sent for more urgent situations. Virtual card reports, barcode reports, and product reports are also available to track inventory in varying detail.

Sell Products in Proper Order

Or Not?

In small business, inventory management has always been one of the most toughest tasks for our business to do. I know that some of them knows to organize their inventory and sell the right product to the right customer. But, some of them doesn’t even know or don’t want to know how to do it properly. It’s not about having the most efficient ways to use the inventory but more about doing it properly.

The procedure of managing inventory is often provide a hard time for the small business owners who are trying to run their business with limited money and facilities. In other case, they do some mistakes which will hurt their business badly.

Inventory is a bunch of products or a bunch of stock which have been stored in a particular area or a particular amount of items. All of these products are collected together in order to manage, maintain and to location properly.

The main reasons behind mismanagement are wrong purchasing decisions, no one to represent the business during the purchase process, and not maintaining stock from time to time.

One of the most important thing to manage the inventory properly is to ensure to sell the product in proper order and in proper customer. If you are selling a product in wrong order or in wrong customer, you are making your business at much risk.

Consider Just-In-Time Purchasing

The spring shopping season is already in full swing and in many parts of the country, it’s already snowing that second sale sign—meaning you’re likely to be doing a lot of last minute shopping. If you’re a small business owner, you probably have a calendar set aside to mark when certain items need purchasing. But as the last minute rush turns into a Saturday afternoon, it’s time to deal with the “inventory.”

Sat afternoon at your local store’s expense can be a stressful and expensive experience for you, your sales staff, and your customers. Instead, you can put everything you need at your fingertips and control the time you allocate to purchasing so you can spend your time focusing on what can help you run a successful business. You’ll spend less time panicking and more time enjoying your business.

Here’s how to make the most of your inventory in a last minute situation.

Build Relationships With Product Suppliers

If you’re a brand new business owner, you’re going to want to develop a relationship with your suppliers as soon as possible. The first step is to get comfortable with the process.

Start by gathering as much information about your suppliers as possible. Work with them to identify your production needs and requirements. Remember, you’re not simply buying supplies – you’re creating a long term partnership.

Have a Conversation with Your Suppliers

Once you have a better idea of what the supplier can offer you, it’s time to have a conversation with key people within the organization. You’ll want to ask questions about how things work within the company, too. For example, what’s their production process like? How are their products made? How long does it take? Are there any quality control issues? You’re interested in knowing how your product is being made, from start to finish.

Once you’ve gathered information about where your product is coming from, it’s time to start the procurement process.

Inventory Management Frequently Asked Questions (FAQs)

What is the best inventory management software for small businesses?

The small business industry has plenty of inventory management software options. If you’re looking for QuickBooks Inventory Management, we’ve got you covered. They’re a leader in inventory management software for small businesses, and QuickBooks Inventory Management is perfect for inventory control and inventory management.

This system is highly customizable and can be worked to fit any type of business.

If you’re a customer of QuickBooks, you get unlimited support resources, including phone and email support. And as you’d expect, QuickBooks users have access to the largest online community of small business managers worldwide.

QuickBooks’ standard 12 month support and service plan includes unlimited technical support via phone and email, in addition to all of the “Incredibly Easy to Use” features discussed above.

Inventory management software solutions from small businesses like QuickBooks are the perfect solution for any small business. Whether you’re a real estate agent, a police officer, or a truck driver, inventory software will make your business run more efficiently.

How do restaurants organize inventory?

Organizing inventory can be a huge headache for independent restaurateurs. This job doesn’t get any easier as you start increasing your employee count and investing in more equipment. Here are some tips you can use to streamline your inventory process at any size restaurant.

Create an effective system of storing inventory.

As a small business with only one or two employees, you might find it difficult to create a system to track your inventory. Make yourself a list of factors you should consider for any system and start fresh with a clean slate. Ask yourself questions such as: How often do I want to check my inventory? How long do I want to keep items in stock before sending them to the back? How long should the system keep items in the inventory? How many inventory bins do you need? How do you want to save your inventory? What space would you need to store your inventory?

Your system of storing inventory should address all these questions. If you have employees, you might also want to design a system that ensures all employees are working from the same system of tracking inventory.

How does inventory management help a business?

Proper inventory management keeps a business running smoothly. Inventory is anything a business purchases, keeps in its warehouses, or may sell to its customers. Inventory insurance coverage is an essential part of a business owners insurance policy.

While large companies have systems in place to manage their inventory and purchasing needs, small businesses and entrepreneurs may not have all the resources and knowledge they need to succeed. This is where a business inventory management system can come in handy.

A business inventory management system can help businesses more effectively control multiple inventory items and inventory data, as well as efficiency. With inventory management software, small business owners can create and manage an inventory database for their entire business and individual products for a small or large business. Inventory software can include functions such as cost tracking, stock keeping and inventory maintenance. Inventory management systems can keep track of the inventory of a single item or a hundred items. These inventory management software solutions integrate into a business’s existing accounting system to help businesses keep track of their inventory as well as the cost associated with each item.

Bonus Tip

Ask yourself how you would track your inventory items if you did not have inventory management software? Do you still know how many each product is? Do you still know the current price of each product? Do you still know where each product is located?

This tool can help increase productivity in every aspect of your business.

Can I use spreadsheets to track inventory?

Bottom Line

The purpose of small business owner can be very vague in general. The main one of them is to make profits. This means to keep your things organized and to discover the most important ones and how to make more from them. One of the most important things is to know what is your product. It is necessary that you have an inventory to find out what is missing, to know what was sold, and to maintain the supplies.