4 Tips for Successful Inventory Management

by J.B. Maverick

4 min read

Managing your inventory smartly is one of the keys to keeping your small business running smoothly and profitably. Without knowing quantities, locations, and other important information about the inventory you have, it’s impossible to keep stores adequately stocked or to know when new shipments of products need to be ordered. There are a number of tips, tricks, and tools you can use to successfully manage your inventory.

SOS inventory

The Intuit QuickBooks’ SOS Inventory program is a great tool to use if you prefer to manually enter your inventory, giving each item a serial number and designated location. Once the item is assigned a tracking number, you’ll be able to assess and track each item’s cost history, production speed, and general profitability. These figures can be compared to any of the other items you’ve entered into the program. SOS Inventory can also be synced with your QuickBooks Online account, which can help you avoid having to manually enter each item every time you make an entry and also help to cut down on typing and input errors. When you create a sales order for new products, SOS Inventory can sync with QuickBooks again to automatically create an invoice, send out sales receipts, and then update your company’s accounting records.

First In, First Out

The “first in, first out”, or FIFO, system of inventory management is one of the oldest and most popular management systems still around. The concept is simple; the items that come in first get sold first. This is important for several reasons, the first being safety. Even if you’re selling nonperishable items, things that won’t expire such as food, products still have a date past which they can’t or shouldn’t be sold or used. In other cases, while the product might technically still be safe to use, the packaging may have become out-of-date, therefore making the product obsolete. Also, the older a product and the longer it is stored, the more likely it is to become damaged.To make a FIFO system work for your inventory, you need to have vigilant staff members whom you can trust to check dates and shelve inventory in an order that makes sense. Older items are pulled to the front and newer items are filled in at the back. It’s also important to have at least one or two people responsible for double-checking how your inventory is being stored to ensure this system stays in place.

Prioritize With the ABC System

Some of the items in your inventory are more important or require more maintenance than others. A simple way to help you and your staff prioritize management of the goods is to use an ABC system to direct the most attention to the items that need it. To start, run through all of the items in your inventory and put them into one of three categories. Items marked with an “A” are high-value products that don’t sell very often. Items marked with a “B” indicate goods that have a moderate value and an even stream of sales. Items marked with a “C” should represent items that have a low monetary value but sell off your shelves quickly. Any inventory in the A category should get your constant attention because the sales aren’t predictable but the financial impact on your company is substantial. Inventory items in the B category need slightly less attention because their turnover is fairly regular and their financial impact isn’t as significant. Items in the C category require the least amount of your attention because their movement is constant and their financial impact is relatively small.

Consistent Auditing

Regardless of what types of systems you put in place to store, organize, and keep track of your inventory, you should put mandatory, scheduled auditing periods in place throughout the year. It’s easy for your inventory to become derailed or thrown out of whack by the smallest of things: a key employee is out sick, a shipment comes in late, a new employee puts something in the wrong place, or a product is recalled. Having a regularly scheduled time to audit your entire inventory, how it’s being organized, and how well the organization is working helps you better understand if your management system needs an overhaul. This also enables you to catch major problems with your inventory before you waste a lot of time and money. The amount of consistent auditing you need depends largely on the type of goods you sell and your preferences. Consider instituting a quarterly inventory audit. After a year of maintaining this schedule, you should have a good idea if the audits need to be that frequent or if you need fewer audits per year. Make sure that physical items match electronic records when the audit is done to ensure the audit does not cause an imbalance.There are a variety of systems, tips, and tools you can put into place to help manage your inventory successfully. These benefit both your business and your customers.

References & Resources

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