One of the most challenging aspects of running a business is learning how to effectively manage your inventory so you have what your customers need and want without having too much excess, which can be a waste of money. Whether it’s deciding what and how much to order, when to order, keeping an accurate count of your products, or knowing how to handle excess and shortages, knowing how to control inventory properly will help ensure your business’s success.
Assessing Your Inventory
1. Understand the goals of any inventory control system.
An inventory control system should accomplish three key goals. Knowing these goals are helpful in letting you know if your current system is effective, if it can be improved, as well as how it can be improved.
- Your system should let you know what is in your inventory at all times.
- Your system should have a means of detecting and updating changes in your inventory.
- Your system should involve a plan for how much inventory to order and keep, as well as when to re-order.
2. Invest in inventory management software.
The first step to inventory control is being deeply aware of how much inventory you have on hand at any given time, what type of inventory you have available, where the inventory is located, and how it changes over time. Today, there are plenty of software applications that can assist in this process.
- Be sure to spend some time searching the software market.
- Consider using Quickbooks or Peachtree.
3. Create clear labels.
Each item in your inventory should have an item number, a quantity, and a basic description which includes the vendor name and any other important details. This makes it easy to identify precisely what the item is. For example, if you order shirts in boxes that contain 12 shirts, the box should have a label that includes the item number for the shirt, the quantity (12), and a description.
- This makes tracking easier by ensuring you know what each box contains and how much it contains.
- If you have extensive amounts of inventory, look into a barcode tracking system. This will allow you to place a barcode on each item, which allows staff to quickly scan, identify, and transfer inventory information into whatever software you are using. This is an alternative to manual labels.
Perform an initial count of your inventory stock.
Even if you are using software, it is important to a physical inventory occasionally. This begins by performing an initial count of your inventory stock. You will want to begin by creating a spreadsheet that has each item number, followed by columns that indicate the quantity.
- You will then simply count all the available items you have, as well as their quantities.
- If you are using software, you will want to add your starting inventory to the software. You will need to add the item number, purchase information, as well as vendor. This will add the item to the software, and when you purchase inventory from now on, the software will automatically update the inventory. It will deduct from the inventory when sales are made.
- Doing physical counts are important to ensure your software is accurate. A physical count also protects against unknown shrinkage and obsolescence.
- Inventory should be counted regularly, but can rely on statistical process or counting those items that move the most or the most valuable.
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