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by Shaz K

Small Business Inventory Mistakes That Could Spell Disaster For Your Company

Tuesday 22, Jan 2019

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Small businesses are run by hardworking, passionate entrepreneurs who really believe in their companies. Inventory management can be very complicated without tools that help businesses stay organized, which often leads to avoidable mistakes.

Here are 9 common inventory mistakes and some simple and practical ways to solve them.

1. Lacking a solid inventory strategy

When it comes to inventory, a little bit of planning goes a long way. Small business owners are pulled in a million different directions, so it’s easy for inventory management to fall on the back burner without a solid strategy. As a result of this lack of attention, managing inventory becomes MORE time consuming because it’s often only done when the situation is desperate. 

The solution:

Carve out some time to create a strategy for your business’s inventory management protocol.

2. Not having a clear, simple process for employees to follow

You can have the best inventory systems in place and an enthusiastic team that’s happy to participate… but without a clearly defined process, all your efforts to get organized will be wasted.

The solution:

Whatever inventory strategy you select, the process should be written out and posted (printed out, emailed, in a blog post or anywhere) for all employees to understand and follow.

Clarify with as much detail as possible what’s expected of employees who remove or add items to inventory, whether it’s logging, scanning, or something else entirely. Offer training sessions on demand and don’t forget to offer refresher courses occasionally, too.

After all, what’s the point in investing in a modern inventory process if only a handful of employees are going to follow it?

Here are some useful pointers—used successfully by some of our customers—for setting up and maintaining a clear process:

  • Start with a new set of inventory instructions based on your current workflow
  • Test out your new process with a small number of employees before introducing them to the organization
  • Roll out to the entire team in phases, not all at once
  • Provide documentation and training at every step
  • Apply inventory strategies to bite-sized tasks first, then take on complex challenges later
  • Set up monthly meetings to get feedback from your employees
  • Be patient, flexible, and open to deviating from your original plan

3. Regularly over-ordering or under-ordering inventory

Feel like you are running to the store too frequently to grab stuff for your small business? Refilling petty cash constantly to keep up with unexpected purchases? An inadequate inventory management system is one of the most common small business inventory mistakes that can leave owners scrambling for items and supplies. All that last-minute shopping can wreak havoc on profits.

Under-ordering leads to:

  • Inability to fulfill orders on time: Not providing to your customers what you’ve promised them and what they’ve paid for is one of the worst things a small business can do.
  • Loss of business: Scary, but true: some businesses have to shutter when they’re out of certain items.
  • Wasted time, energy, and resources: Sending out employees to buy stuff when they should be doing their regular jobs isn’t just a pain, it’s a problem.
  • Overpaying: When you buy something last-minute or in-person, you’ll pay unnecessary premiums and rush shipping charges. And you won’t be able to price shop, either.

On the flip side, a disorganized or haphazard inventory also leads to wasteful over-ordering. Many small businesses erroneously think over ordering isn’t that big of a deal. After all, extra inventory can always be sold or used later, right? Well, not always and not really.

Over-ordering leads to:

  • Loss of cash flow: Loss of cash flow is one of the top reasons small businesses fail. There is no reason to pay for and hold onto stock you don’t need in the near future. The less stuff you have to stock, the more cash you have to invest in other areas of your business, like marketing and personnel.
  • Wasted storage space: For many businesses, real estate is valuable. Save it for only the stuff you really need, and use the rest for precious staff!
  • Items that go bad or expire: From salad dressing to cortisone, over ordering items that don’t last forever isn’t just a waste of space but a total waste of money.
  • Wasted time: All that time you spend ordering, receiving and stocking stuff you don’t need would be better spent doing literally anything else.

The Solution:

Fortunately, most modern inventory management softwares can alert you when item levels are too low or too high. Now there are tools that help businesses stay organized with stock level alerts, so you don’t have to overspend when you’re in a bind…or under-order by accident. Instead, a friendly reminder will prompt you to order when the time is right.

4. Not having (at least) one person who’s accountable for your inventory

While keeping inventory updated is generally a team sport, the task still requires a coach (or a GM… or a captain) who ensures everything is running smoothly! This leader doesn’t need to do all the heavy lifting herself, but she should practice what she preaches and inspire others to keep up the good work. You don’t need an inventory manager to succeed, but you absolutely need to identify a leader.

The Solution:

Establish an employee responsible for training new hires on how to follow inventory protocols. If you’re using software, this delegate can teach others how to use the app. They can also help decide what level of access a given employee might need.

5. No real-time access to inventory

A business is a system of moving parts. Small companies rely on inventory that can change constantly, and is not always kept in one place. That means that if the right employees cannot access the inventory from anywhere, anytime, they might be ordering or purchasing items that your business just does not need.

Sometimes, that’s a mistake that costs only a few dollars. Other times, expensive and expiring inventory is unnecessarily ordered, causing huge losses for a small business that cannot take the hit.

The Solution:

Insist on an always-up-to-date inventory that is manageable from portable platforms like smartphones and tablets. That way, accurate decisions can be made, whether from a trade show or your own sofa.

In the past, only large companies could afford the cutting-edge technology that made this possible. But today, even businesses that are just starting out can afford great inventory tools that help businesses stay organized that’s accurate and accessible.

6. Not conducting an occasional inventory process audit

Internal audits are no fun, but they are totally necessary. Many small businesses have no idea how unproductive and unprofitable many of their processes are. Regular audits will help you and your team stick to the processes you’ve set in place for a reason.

The Solution:

An internal audit also presents a good opportunity to see what is working and what is not. These audits bring to light the weak spots of small businesses, the ones that waste time and money every single day. Many small businesses have no idea just how unproductive and unprofitable many of their systems are.

If one of your employees does a weekly inventory, then you should spend a few hours shadowing him. You may learn a couple things about how your business runs that you really love… or that you really want to change.

We recommend internal audits every quarter.

7. Not utilizing technology correctly

It’s only natural to want to give everything we’ve got to a problem we’re trying to solve. But when it comes to inventory, many business owners can become too eager to fix things, and in the process, make getting organized really stinkin’ complicated. And that makes implementation very well near next to impossible.

The Solution:

When it comes to inventory and tools that help businesses stay organized, the key element is simplicity. Here are some areas you can look to simplify your inventory challenges:

  • Use the right technology: Find a modern (simple) inventory solution for your business. There are affordable tools that help businesses stay organized, so there’s absolutely no reason to spend a fortune on an enterprise-level or custom software. You’ll end up with inventory technology that’s so tedious most of your employees won’t be able to figure it out.
  • Don’t get tied down by expensive hardware: Why buy a dozen barcode scanners when a smartphone will do the trick? Don’t by tablets or devices that only run some unnecessarily complicated inventory systems full of useless features and functions. Especially  when there are intuitive and inexpensive solutions that can give you every function your business needs?

Strive to find the perfect system for your small business: one that saves money without decimating resources.

8. Over-reliance on one employee who “knows everything”

Every small business wants that all-star employee who just “gets it”. Energetic and helpful, this hire begins to feel like a vault of company knowledge…they become irreplaceable.

Here’s the truth: it’s unsustainable and unwise to expect and allow just one employee to be the sole keeper of so much vital information. Especially as it relates to inventory. What if they simply cannot be reached when questions arise? What if the employee goes on leave or finds another job?

The Solution:

With modern inventory management software, there’s no reason to burden one high-performing worker with all that responsibility. Sure, they can still be a top-notch asset to your business, but your everyday ability to function (and thrive!) should not depend on anyone.

All inventory information should 100% be kept on a constantly syncing, always accessible digital platform that’s easy to use and understand.

9. Still insisting on using manual processes to manage inventory

This is the biggest time-waster of all common small business inventory mistakes. While some businesses allow their inventory strategies to become too complex, other companies are overly reluctant to modernize. Afraid of training and on-boarding, they still use Excel, memory, or pen and paper to keep track of inventory. Everything is done by hand. It takes forever, and the company wastes time and money as a result.

The Solution:

Technology has come a really long way, and it doesn’t have to be scary. It can be intuitive and full of benefits that really make your business run better.

Whenever possible, small businesses should strive to reduce inventory errors by using barcodes, QR codes, AI and RFID data to check items in and out. Handwritten inventories, which are often printed in tiny chicken scratch, turn employees and management alike cross-eyed while checking on items and supplies.

Many businesses are resistant to use barcode or QR code technology because it seems “too techy”, but lots of these companies find that once they try scanning, it’s not scary at all. Remember, functions like this were designed to be user-friendly for people like you. 


Ready to have your business changed by modern, intuitive inventory software?

Try a free demo of Sortly today!

Inventory app that works on a laptop, tablet and smartphone.

Sortly is a super simple inventory and asset tracking system that enables you to visually track all your items and any of their details including quantity, price, condition, notes etc —for a more intuitive (and less maddening) way for your team to track your inventory across multiple locations.

Unlike other inventory tracking systems, you won’t need any lengthy sales visits or a 100-page guide to figure out Sortly. It’s built so you can have it up and running in minutes, all on your own.

It’s time to say goodbye to lost assets, complicated spreadsheets and time-consuming “solutions” so you can spend less time inventorying and more time businessing. Check out this short video introducing Sortly.

Click here to try Sortly FREE for 14 days

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