Owning a small business is no easy task. There’s a lot to keep track of between marketing your business, dealing with customers, and handling finances.
One important aspect of running a small business is inventory management. By executing effective inventory management techniques, you’ll be able to keep your business running smoothly and ensure that you always have the products your customers need.
What is inventory management?
Inventory management is the part of supply chain management that makes it possible for you to have the exact products you need in the right amounts for sale – and at the right time.
When inventory management is done correctly, it can reduce your overall costs and overhead by having to keep a lot of excess inventory in stock. You’ll know exactly what your customers want, you can have it when you need it and maximize your sales. The best inventory management will make it possible for you to track inventory in real time. The process will be 100% streamlined.
Why inventory management is important for small business owners
Here are a few benefits of inventory management for small business owners.
The most obvious benefit of good inventory management is that it can help you reduce your costs. Sure, with larger orders you can negotiate better payment terms or shipping rates, but it’s important to remember that the cost of purchasing the stock itself isn’t the only expense involved in maintaining an inventory. The more inventory you have, the more space you need to hold it.
Therefore, effective inventory management will give you a better idea of what you actually need – allowing you to reduce costs while also freeing up space.
Frees up cash
Inventory management also frees up cash. If you buy smaller quantities of your products more often, you’ll have more cash on hand rather than tying it up in stock. This is vital for small businesses that are dealing with a more unpredictable or fluctuating cash flow.
Improves customer satisfaction
Finally, inventory management can improve customer satisfaction. It’s frustrating for customers to find out that an item they need or want is out of stock. You might not only lose the sale, if that’s the case, but also the customer for life. You’ve left a bad taste in their mouth!
What do small business owners use for inventory management?
There’s no one-size-fits-all solution when it comes to inventory management. However, popular software tools include Brightpearl, Zoho Inventory, and Veeqo.
You can always manage your inventory manually, without any kind of tech, if you’re on a budget. Tools include things like ledger books, spreadsheets, and stock cards. However, paying for inventory management software is actually a good way to save money since it will streamline your processes.
Tips to effectively manage your inventory for small business
Follow these tips for effective small business inventory management.
Use Inventory management software
Inventory management software is integral to small business owners. You might think your business is too small to need inventory management software – but this is a common misconception. This kind of software is vital regardless of the size of your business.
It can help you keep track of all of your inventory in real time, something that can reduce your costs and improve your cash flow (read – a healthier bottom line). You can predict demand and prevent shortages while also preventing having too much stock on hand. It allows for multi location management and the best warehouse organization. Most importantly, a good inventory management software will help you save time and money.
Do your best to fine-tune your forecasting. Your projected sales calculations should be based on a variety of factors (and these should be as precise as possible) such as your historical sales figures, predicted growth, the economy, market trends, marketing efforts, and so on.
Consider using the FIFO approach to inventory management. It’s kind of like the concept of rotating old milk to the front of your refrigerator and putting the new milk in the back so you use up the old stuff first!
Good inventory management will require you to sell goods in the same chronological order as the ones they were made or purchased in. It’s especially important for perishable products but it’s also a good idea for non perishable items. The longer an item sits, the more likely it is that it will become damaged or otherwise unfit for sale.
Audit your stock
Take the time to audit your stock. Count your inventory to make sure what you have actually matches your numbers of what you think you have. Yes, this needs to be done from time to time even if you have quality inventory management software!
No matter what kind of industry you work in, make sure all of your products look fantastic and work well. This can be done at the same time as when your employees audit the stock. You might use checklists that include boxes for signs of damage and even tips for correct product labeling.
Tips of small business retailers
As a small business owner, do your best to understand your stock, including what you have, when you have it, and who is buying it (and of course, how much). A thorough understanding of your sales trends is key to give you the insights you need to make sure you have the right kind of inventory.
Next, make sure you have the inventory management system for small business owners in place to handle those insights. Use an all-in-one retail management system that combines inventory management with sales and ordering systems so you can monitor stock levels in real-time and place orders as soon as possible.
Tips for small business product manufacturers
And if you make your own products? Some businesses are responsible for the entire supply chain, like a producer and retailer of handmade purses. You source your own raw materials and then turn them into items to sell.
Therefore, your inventory will consist of those raw materials, the work-in-progress pieces, and the finished products. You’ll want to have a clear idea of each of these categories at all times. The tips above can help!
How Kickfurther can help
Have you ever struggled with inventory management? You’re not alone. Inventory is one of the biggest challenges facing small businesses today. But don’t worry, we’ve got your back. Check out our top tips for how to manage small business inventory above to see how you can apply them to your own business.
With Kickfurther you can fund millions of dollars worth of inventory at costs of up to 30% lower than the competition. You’ll have the money you need to pay your suppliers without having to create a purchase order or accounts receivable. With more than $100 million in inventory funded to date, Kickfurther is the world’s first online inventory financing platform that enables companies to access funds that they are unable to acquire through traditional sources.