How to do small business inventory
Keeping track of your items is vital for the success of a small business.
One of the most important tasks for a business owner is keeping track of inventory. Large companies may use an expensive point-of-sale system that tracks inventory electronically, but for smaller businesses that may not be feasible. However, it's still important for any business, regardless of size, to know what inventory they have on hand.
What is small business inventory management?
Inventory management is the process of having the right product in the right amount for sale at the right time. Proper inventory management will help a business lower costs by reducing excess inventory while maximizing sales. Good inventory management can help you track your inventory in real time to streamline this process. A good inventory listing is also an important record to supply a claims adjuster if you have a significant insurance claim. If you run a small business out of your home or offsite, check out how to do a home inventory, too.
Do you need more than one inventory?
Your inventory is more than just the items for sale. Even businesses that only provide services and not goods need to keep an inventory. All items owned by your business should be accounted for in case you suffer a loss. This means all business equipment such as desks, chairs, copiers, etc., should be included in your inventory.
If there is a loss, whether to your sales inventory or business equipment, an inventory will help you take steps to prevent further losses, whether from employee theft, weather or some other disaster.
Ways to track inventory
There are several methods to keep track of your inventory. You should choose the one that works best for you. Several popular options include:
- Video: Using your phone or a video camera, take a detailed video of your inventory making sure to record details about model numbers and quantity. You can talk over your recording to describe the inventory to help get the details. Don't forget to record any off-site inventory as well. This is a quick and easy way to start an inventory but may get quickly outdated.
- Photos: Like video, photos can be helpful in making an inventory, but make sure to label your photos with more detail. Also, like video, this type of inventory may quickly get outdated.
- Receipts: Keeping receipts in a safe, secure location will help with an insurance claim. You'll want to keep the receipts up to date and file any receipts for items that are no longer in your inventory.
- Detailed written inventory: This method will be the most time-intensive and the most useful for a business. Keeping track of each item of inventory as it comes in and as it leaves will help a business owner track sales trends, losses to theft and areas that are growing. You can keep this list on paper or a spreadsheet.
- Inventory management software: If you're willing to invest in software, you can set up a system that tracks your inventory in real-time. This may be the costliest inventory method but it could pay dividends in reducing waste and increasing sales.
Take care to keep your inventory list safe and accessible. You should consider storing your inventory list offsite or on an online cloud storage site. If a disaster strikes, having access to your inventory list will make any insurance claim easier and more complete.
Conduct a physical audit
Inventory management can be a time consuming process at the beginning, but it will save you time and money in the long run. Follow these steps to get started:
- Declutter: Getting rid of unused or old items in your inventory will decrease the amount of items you need to inventory as well as make it easier to take future inventories.
- Count: Create a system to count your physical inventory by separating items by use or volume. Creating separate categories will help you tackle the task in small chunks as well as help you set attainable goals.
- Label: While counting, make it a practice to label all containers or items. Labeling individual products and warehouse storage of products will help you in future inventories.
- Confirm: Take your physical count and compare it to what your inventory software reports, if available. If it doesn't match, compare your inventory to your sales and purchase receipts. Are there any gaps or missing items?
- Document: Between inventories, make sure you have a way to track incoming orders and outgoing shipments.
- Streamline: Now that you know what inventory you have, future inventories will give you a sense of where you have shortages or excess stock. Take that knowledge and apply it to future ordering. Also, take some time to learn more steps to take to make your small business a success.
Make your small business inventory part of your business continuity plan
Having a business continuity plan in place if disaster strikes is important and your inventory is a vital part of that plan. Knowing what items in your inventory are available or lost to the disaster will help you get your business operations back up and running as well as help with any insurance claims. As part of your plan, you must make sure your inventory list as well as any other vital information is stored off site or in data backups in the cloud. You should also review your inventory with an insurance agent to make sure you have adequate coverage in case of disaster.