inventory best practices

Inventory Best Practices for Your Small Business

By Princess Jones

The backroom of a retail business is a magical place. It’s where the size/color/style that a customer has been searching the racks for might be found. It’s where the bulk of the business assets are stored. It’s where the inventory lives.

Inventory can be very complicated or it can be very simple. It all depends on how you apply some of these inventory best practices in your inventory management process.

Regular Inventory Audits

Your inventory is only useful if you actually know what you have on hand. Otherwise, it’s just a bunch of stuff. That’s where regular inventory audits come into play. Organizing, sorting, and counting your stock helps you keep an eye on what you have versus what the paperwork says you have. If you don’t do regular inventory counts, you run the risk of have discrepancies.

While inventory audits are a must, it’s up to you to decide who the frequency and strategy of your audits. Depending on the nature of your business, it might make more sense to audit weekly rather than monthly. Some businesses group products by pricing and others group them by category. Again, that’s a decision you make based on your business needs.

Who does the stock audits in your business? At the very least, institute a double check in the process, using two staff members. Each person starts at a different end of the inventory and works their way to the other end. When the process is done, they compare notes. Anything that has a different count gets recounted. If your inventory is big enough to warrant it, consider hiring a stock manager to manage the processes and staff.

Quality Control

Quality control is a big part of inventory management. In theory, the stock you have is an asset. If the stock you have down as an asset is not actually sellable, you’re working with inaccurate numbers. And making decisions on inaccurate numbers is a disaster waiting to happen.

During your inventory audits, be sure to also look out for unsellable product — anything that may be damaged, spoiled, or otherwise undesirable to a customer. Update your inventory sheets to show those products as unsellable to provide an accurate picture of what your business has on hand.

For perishable items, you want to use the FIFO rule — first in, first out. This helps you make sure that you’re rotating stock properly. If you don’t follow it, you’ll find yourself with rotting inventory that you can’t sell or move, which makes it worthless.

Consider Dropshipping

Managing inventory can get complicated and time consuming. If your business doesn’t have the resources to maintain proper inventory practices, consider moving to a dropship model. Essentially, when a customer orders a product from you, you’ll order that product from a third party to fulfill the order. Stock never comes to you so you never have to maintain an inventory.

While not every business is suitable for dropshipping, the ones that can utilize it will see their inventory management style complete change. You’ll also be able to offer a wider variety of products because you won’t have to keep the inventory in stock. And since you won’t be maintaining stock at all, your overhead will go down.

Photo credit: Shop assistant checking inventory from XiXinXing/Shutterstock

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Princess Jones
Princess Jones is the evil genius behind P.S. Jones Copy & Design, where she helps food and drink businesses speak the language of their audiences. For more talk about copywriting, design, and the tools to pull them off, follow her on Twitter @imprincessjones.

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