by Shaz K

10 Most Common (but totally fixable!) Inventory Management Mistakes Small Businesses Make

Tuesday 22, Jan 2019

Inventory Management
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Small businesses are usually run by hardworking, passionate entrepreneurs who really believe in their companies. Unfortunately, too many small businesses are making completely correctable inventory management mistakes that are causing them to waste precious time and money.

In this article, we’ll discuss ten commonly made inventory mistakes and some simple and practical ways to solve them through better organizing and beginning to rely on the right, modernized resources like our inventory management software.

1. Lacking any inventory strategy or plan

When it comes to inventory, a little bit of planning goes a long way. Many small business owners take great care to make sure so many aspects of their businesses are completely perfect. But they’ll often treat inventory as a non-critical detail of operations. As a result, managing inventory ends up consuming so many business hours that were never accounted for.

Carve out some time to sit down and create a strategy for your business’s inventory management protocol. Understanding, and then streamlining, how your business will tackle inventory will create significant opportunities for a more modern, successful and profitable business.

Your plan should address at least some (and hopefully, all!) of the following questions:

Q1 .What are your biggest inventory-related pain points?

Examples include: too much wasted time, stock losses, and under-ordering or over-ordering to the extent that profits are affected. Think about this question not just in terms of today, but regarding your business in the future.

Q.2 What are your KPIs (key performance indicators)?

Your KPIs will help you figure out where to focus your efforts, both now and in the future. They will also help you recognize precisely where you have succeeded and failed. They can also be quite helpful in selecting the right inventory system for your business. Make sure to track KPIs in units that are meaningful to your company, like hours saved per day, difference in inventory losses, etc

Q.3 What kind of software or system do I need?

Consider questions like – whether you need something mobile-friendly, how much you can afford to spend on a solution and whether you require a product that requires little to no training.

Most importantly Ask yourself: What features are important to me? Do I need something simple, or packed with add-ons?

Remember – The solution you select will determine whether your inventory plan ultimately succeeds or fails… so choose wisely! I highly recommend you try out a few for size before deciding.

Q.4 How will I roll out my new solution to our employees?

A plan is only as good as its execution. Make sure you know how to introduce the new system to your employees, as failing to do this causes many strategies to fail. Get buy in from your team and involve them in the process from the beginning.

People hate change… so be patient and simplify things as much as possible. Test out your training with a couple of employees before you onboard everyone, and get those early adopters to help train others.

Q.5 When is the right time to implement my new plan?

For most business owners or employees, inventory is not a primary responsibility. That’s why it’s best that you carve out a few hours to implement the new strategy… you don’t want to keep putting this off. It might seem like a challenge to block off a morning or afternoon to start the inventory process, but trust us: you’re already losing precious time every day to bad inventory habits.

Q.6 Who needs to be involved?

Find people who share your vision for a better, more organized business and ask them for help so your company can get to the finish line faster. Of course, too many cooks in the kitchen can lead to chaos, too. So practice balance while building your dream team of problem solvers and ideators.

Other practical tips to keep in mind while planning

Small business owners should be careful not to expect too much on day one. Your new inventory process might not be perfect and stress-free on the first day. Roll out your new program in phases. Try out your inventory process on a certain section of your business and see how it goes. Learn from your mistakes. Don’t try to be perfect from the get go. Keep improving your process based on results and feedback.

Remember, Rome wasn’t built in a day. And your business’s inventory wasn’t either.


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 moot.

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 work flow
  • 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 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 can leave small business owners scrambling for the items and supplies they didn’t realize they were low on… and all that last-minute shopping can wreak havoc on profits.

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.

Here are some major pitfalls of over ordering:

  • 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.


And here are the serious downsides to under ordering:

  • Inability to fulfill orders on time: Not providing to your customers what you’ve promised them and they’ve paid for is just about the worst thing a 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.

Fortunately, most modern inventory management softwares can alert you when item levels are too low or too high. That means 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 eventually accountable for your inventory

While keeping an 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.

This leader should be 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.

If you’re a small business, picking the right person to drive your inventory efforts can be tricky. Look for someone who checks off most of these boxes:

  • In an operations role (preferably)
  • Comfortable with technology
  • Detail and process-oriented
  • Understanding, patient and good at working with others
  • Likely to remain driven, even when facing obstacles and speed bumps

If you can’t find someone who checks all these boxes, you may have to choose the employee who comes closest. You can always help them fill in the gaps.


5. Don’t have real-time access to their inventory

Many businesses are a system of moving parts. These small companies rely on inventory that can change constantly, and is not always kept in one particular 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.

To avoid such errors, 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 software 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 just how unproductive and unprofitable many of their processes are. It’s too easy to cut corners when running a business, and regular audits will help you and your team stick to the processes you’ve set in place for a reason.

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, well, next to impossible.

When it comes to inventory the key element is simplicity. Here are some simple areas where you can look to for simplifying your inventory challenges

1. Use the right technology

Find a modern (simple) inventory solution for your business. As as small business, there’s absolutely no reason to spend a fortune on a 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.

2. 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 keep so much vital information to themselves. Especially when it comes to inventory. What if they simply cannot be reached when questions arise? What if the employee goes on leave or finds another job?

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 (I know… it’s crazy)

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.

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 out scanning, it’s not scary at all. Remember, functions like this were designed to be easy to use and offer lots of value to users like you.


Ready to have your business (and your P&L!) changed by modern, intuitive inventory software?

Try a free demo of Sortly today!

Sortly Pro Inventory App Dashboard

Sortly Pro 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 Pro. 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 Pro!

Visit our website to learn more or try Sortly Pro free for 14-days.