Your small business’s inventory is essentially the collection of items that you have or will list for sale, or the raw materials needed to create those products. Some businesses also keep track of internal inventories, like company phones or computers that they need to pass out to their employees.
Taking inventory should be a regular, ongoing process within your business. If not, you can end up losing track of important items, running short on supply of high-demand items, and even prioritizing products that don’t move quickly and cost your business money.
If you aren’t keeping up with your inventory just yet or if you’re trying to find a new solution, then keep reading! In this post, we’re going to go over how to take inventory for small businesses. We’ll discuss several methods for inventory tracking, including inventory management software. We’ll share tips for how you can speed up the process, and show you how to turn a complicated process into a simple one.
How to Take Inventory: What is The Best Way?
Taking inventory is the process of assessing what you have in stock. This can help you see what products you need to reorder. A careful review of your inventory turnover can also help you identify which products sell fastest, which can help you decide what products you want to prioritize moving forward.
There are multiple different methods you can use to take inventory.
Some businesses use daily audits. These companies go through their entire inventory on a daily basis to assess what they have and what they may need. In many cases, this is used as a manual inventory tracking strategy, where an employee will manually go through a checklist to see what they have in stock. This is also known as physical inventory.
While you can audit your entire inventory on a regular basis (whether that’s daily, weekly, or monthly), you can also use what’s called “cycle counting.” This is the process of continually auditing your inventory on rotation. A sports good store, for example, may decide to audit their jerseys one day, their sneakers the next, and so on.
Cycle counting can help make manual inventory tracking more manageable when you have a large number of products on hand or limited tracking resources.
Occasional inventory tracking sometimes works well for businesses with large inventories of relatively low-cost goods, but not always.
Other businesses opt to use perpetual inventory, which uses an inventory tracking app or a point-of-sale (POS) tool to automatically track inventory that’s checked into the system when delivered and checked out when purchased, damaged, or discarded. Most of these tools work in real-time so you always have an up-to-date view on your current inventory.
The Step-by-Step Process to Taking Physical Inventory
When you want to take a physical inventory, there are a few steps involved. Keep in mind that if this feels like a lot to take on, there are inventory management tools that you can use to skip multiple steps and automate the process.
If you’re opting for a manual audit, here’s how to take inventory for your small business:
If you’re taking an entire inventory of your store and you have a large number of products, you may need to schedule this in advance. Prepare to have extra team members on hand, have team members come in early, or even shut down the store for a day if needed.
Set up an excel file that contains a list of all of your current products with categories for the product name, current price, any necessary identifying or qualifying information, and the quantity you have in stock. You should be able to update this list moving forward as you add or remove products.
Make sure that the employee that is taking inventory is trustworthy and experienced. They need to know what each product is and understand the importance of careful inventory tracking.
You can either print out a list of the inventory categories you need to count, or use a computerized system that you can carry with you through the store.
Start with small sections within the store, and count the number of each item that you have available. If you’re unsure if the number is exactly right or if it doesn’t match up with what you’re supposed to have, count again.
If you’re using a computerized system, you can use a scanner (including your phone’s camera, if applicable!) to automatically track each item that you have in store.
Have a plan for inventory that’s in “limbo.” If any items are in layaway, for example, or saved somewhere under the counter for a customer, you’ll want to know how to qualify it when taking inventory and where to find it.
Evaluate your actual inventory compared to what you’re “supposed” to have in stock, and look for what caused any discrepancies. Some products may be labeled incorrect, a damaged item may not have been logged correctly, and both employee and customer theft may cause lost items.
Make or update your log of your existing inventory, and use the new information when tracking your inventory moving forward.
How to Take Inventory Faster
Taking inventory can clearly be a time consuming process, even if the number of products you have in stock don’t require a massive storeroom or warehouse to keep it all stashed away. Fortunately, there are tools and methods that you can use to streamline the inventory process. Let’s take a look at the best strategies you can use to automate and speed up the process.
Assign an Inventory Point Person
Not all employees are going to be a great fit for leading the charge on taking or managing inventory. Those who are new to your business or who struggle with natural organization, for example, aren’t the workers you want to take lead.
That being said, assigning an inventory point person who is reliable, organized, and knows both your business and inventory tracking methods well is a great strategy. This individual may be a manager, store keyholder, or another experienced employee who knows the ins and outs like no other.
Having someone in charge will not only ensure that taking inventory is completed, but they can also break up the tasks to different employees to manage the process overall. They may dictate what categories of products are reviewed first, for example, or know how to organize the store to make inventory tracking easier.
With that being said, it’s important that no business ever over-rely on a single employee to manage inventory. After all, what happens if that employee calls out sick, goes on their honeymoon or gets a new job? Using an intuitive app or other system that everyone can understand is key to creating a inventory management system that will be successful in the long run.
Have a System in Place for Easy Inventory Management
Using a standard operating procedure when taking your business’s inventory is a great call. It keeps everyone on the same page and ensures that nothing is slipping between the cracks. This can reduce manual errors significantly, which is essential when you’re tracking some of your store’s most valuable assets.
You may require, for example, that audits of high-value products are conducted at least once daily, or that workers need to either take count by the product type or the location of the store. A hospital, for example, would likely have a crucial medication like epinephrine stores in multiple locations throughout the building; do you want your staff to take inventory based on each individual storage area, or the hospital in general?
Develop a standard operating procedure in advance, and make sure that any team members involved in inventory tracking have access to it. This will prevent potential discrepancies.
Reconcile Inventory in Advance of Busy Seasons
A school supplies store can expect a massive rush in business sometime between July and August every year, and perhaps again in January once classes are back from break.
You don’t want to wait to take a full store inventory until you’re in the middle of your busy season once the chaos has struck. Instead, it’s important to take a full store inventory at least a few weeks before your busy season begins.
It will be much easier to resolve discrepancies at this point than if you wait until your sales volume explodes. This also allows you to double-check that you have enough supply on hand to get through the busy season, preventing a potential loss of sales that might occur if you were to run out of a high ticket item.
The best inventory software allows you to quickly scan barcodes or QR codes on product tags to check items in and out of the system, and automatically keeps track of what you do and don’t have in stock. The best tools will be search-friendly so you can quickly look up any given product. This product should also send you alerts when you reach a given, customized par or are approaching expiration or warranty dates for certain products.
Sortly, for example, is an inventory management app that’s designed to be user-friendly and intuitive. Our app can be used on both desktop and mobile phones, the latter of which can be used to scan both barcodes and QR codes. In addition to scanning codes through your smartphone’s camera, you can also generate QR codes so that even products you create yourself or come unlabeled can be automatically tracked.
Final Thoughts: Choosing a Tool That Works for You
Inventory doesn’t have to be a super time-consuming process, but it’s still essential for all small businesses. Yes, there are plenty of steps involved in keeping up with all of your products and supplies, but the right tools and strategies can speed up the process significantly.