Small Business Owner’s Guide to Inventory Management
You’ve got some awesome ideas brewing. But keeping track of everything that’s going on inside your head and behind the scenes of your business… well, that can turn into a major task really fast.
Maybe you’re just about to start a fabulous new boutique and want to make sure you’re setting yourself up for success. Or maybe you’ve had your shop for a while now and you’re tired of constantly having to do the math in your head about how many of each item you have left in stock and how many pieces you can afford to order once you’re running low. Or maybe you’ve ordered too many of a certain style one too many times and want to make sure you’re ordering inventory that maximizes your profits instead of collecting dust in your closet.
Whatever your situation, inventory management just might make your life a whole lot easier.
Every boutique needs fabulous products, but keeping track of those products can be tricky… especially as you expand to multiple locations, start carrying products in multiple categories, and order items in various sizes and styles.
Sure, you’re smart, but keeping all that information in your head is bound to cause a few headaches… not to mention a few inventory errors that can be disastrous for both you and your customers.
Even if you’re just getting started or only offer a small selection of products, implementing a good inventory management system can save you tons of time running your boutique. And nowadays, there are plenty of low-cost or free inventory management software platforms designed to help you manage this unglamorous but necessary task.
Read on for a small business owner’s guide to inventory management, including what inventory management is, why it’s important, and how to use software to manage your boutique’s inventory.
What Is Inventory Management?
Inventory management is the process of ordering, storing, and using a company’s inventory. Whether you currently have a system for completing them or not, chances are you complete all kinds of inventory management tasks each day.
You might order new inventory from a variety of suppliers, navigating shipping timelines, gauging how many of each piece to order, and placing orders for new categories of items.
You might get creative in how you store your inventory, whether you do so at your store’s physical location, in a dedicated warehouse for your online shop, or simply in the back corner of your closet.
You might use inventory in a variety of ways, whether to take promotional photos for your social pages or website, displaying it in your storefront, or fulfilling orders placed online.
Inventory management helps facilitate all of these tasks. It also aids in keeping track of how many of each item you have, so you never find yourself in the undesirable situation of running out of products when customers are ready to buy them.
Inventory management might look a little different depending on whether you operate an in-person retail business or an eCommerce store.
Inventory Management for eCommerce
Inventory management for eCommerce combines physical products with digital organization. Though all you need to create a new listing on your online shop are a few product photos, you’d better make sure you always have the physical products to back each listing up. eCommerce inventory management keeps track of each item’s stock as items sell. Some inventory management software may even notify you when things are running low on stock and prompt you to place a new inventory order.
Basic inventory management features are often integrated into eCommerce platforms. However, if you use a different method (like selling primarily on Facebook lives) or you sell on multiple platforms (your own website, social media, Amazon, Etsy, etc), you’ll have to keep track of orders and inventory across all of them.
Inventory Management for Brick and Mortar
Inventory management for brick-and-mortar businesses can be a little more straightforward since what the customer sees is exactly what’s available. (Aside from any products you might keep in the back or in a warehouse!) Still, it’s a good idea to keep track of how many products you have on hand and what’s selling when. An inventory management system can also help you coordinate inventory across multiple locations or between your physical location and your website. It’s helpful to have a POS system that automatically updates inventory records with every sale so you can stay up-to-date.
Why is Inventory Management Important?
When you’re running a retail store, inventory isn’t just a valuable asset. It’s the very core of your business. A shortage of inventory when and where it’s needed can really cost you… and not to mention inconvenience your loyal customers.
But on the other hand, inventory can also be a liability. It’s in danger of being damaged, stolen, or simply unwanted or unsold. Your inventory is only as valuable as your customers believe it is… so you’d better make sure you’re keeping the most in-demand products in stock and avoiding overstock of other items.
Inventory management helps you know when to restock inventory, how much to purchase, what price to pay, when to sell, at what price to sell it, and more. It can help you maximize profits, never run out of popular items, and avoid being left with inventory you can’t move.
Here’s a quick summary of what good inventory management can do for your business –
- Fewer missed sales – Avoid missing out on a potential sale just because you didn’t have the right products in stock
- Better invested cash – Make sure your money’s making money by putting it in the right products
- More accurate reporting – See what items are performing best and where the most profit is coming from at a glance
- Easy reordering – Place recurring orders with select suppliers directly from your inventory management platform
- Reduced warehouse/storage costs – Avoid the inconvenience of storing unsuccessful products for long periods of time
- Peak season efficiency – Make sure you keep the right number of products on hand, during busy seasons as well as slow seasons
How Can I Manage My Boutique’s Inventory?
Many small businesses tend to keep track of current stock manually. They might determine to reorder points and quantities in Excel, or even with a pen and paper if they’re really old-school. If organization is a major strength of yours, this can be plenty sufficient… though there may be a better way.
There are also many platforms out there that automate much of the process and coordinate between different points of sale, like your online store and your physical location.
Especially if you’re a larger business, a more sophisticated inventory management tool has the potential to save you a ton of time and energy. But even if you’re small or just starting out, it might be a good idea to use a dedicated inventory management platform. It’ll help you keep good track of everything you have going on from the get-go and make it easier to scale your business. While there are certainly complex and expensive inventory management solutions out there, many are rather affordable and straightforward.
Inventory Management Strategies
No matter what tools or methods you use, you’ll still have to come up with an inventory management strategy that’s the best fit for your business. While it’s possible to automate things, you’ll have to decide how much product you’d like to keep in stock and when you’d like to place new orders. Here are a few popular inventory management strategies for small businesses:
- Just-in-time (JIT) – this is an inventory management method where you keep as little inventory on hand as possible. Using this strategy, you don’t stockpile products or materials just in case you need them – you only reorder products to replace those you’ve already sold. This can help retailers reduce their storage costs and keep inventory fresh, though retailers who use the JIT method may be in danger of running out of stock if shipping or production isn’t reliable.
- Safety stock – this is an inventory management method where retailers or manufacturers hold extra inventory in case demand rises unexpectedly. It’s implemented to prevent stockouts that may be caused by erroneous calculations, changes in consumer demand, or variability in shipping or production timelines.
- Economic order quantity – this is an inventory management method that calculates the ideal order quantity a company should purchase to minimize inventory costs, including storage costs, shortage costs, and order costs. It seeks a middle ground where a company doesn’t have to make orders too often and does not have an excess of inventory on hand.
Top 5 Inventory Management Platforms
Ready to start automating your inventory management tasks? Here are five of the top affordable inventory management platforms for small businesses.
QuickBooks offers inventory management software that automatically updates inventory levels as sales are made and items are shipped. It monitors your supply in real-time, helps you plan purchases from wholesalers and manufacturers, and helps you keep a finger on your cash flow. With automatic reordering, real-time dashboards, and powerful integrations with Shopify, BigCommerce, Square, PayPal, and other sales tools, it’s a great inventory management option.
One thing to keep in mind is that QuickBooks is first and foremost an accounting or bookkeeping software platform. Its subscription-based plans include inventory management as well as other important bookkeeping features, like income tracking, invoicing, payment processing, tax deductions, sales tracking, and more. If you’re looking for both an inventory management solution and excellent accounting software, this may be a great pick for you.
QuickBooks Online starts at $35/month.
Zoho Inventory is another great inventory management software option, especially for small businesses. With it, you can automatically reorder from your suppliers when your inventory falls below your chosen threshold, manage your warehouse, scan barcodes, fulfill orders, create invoices, and more. Like QuickBooks, Zoho Inventory goes beyond traditional inventory management features.
Zoho Inventory offers a free plan with 20 shipping labels allotted per month. If you’ll be shipping more orders than that, paid plans start at $39/month. Zoho also offers a free 14-day trial to test things out.
Already use Shopify to power your eCommerce store? You might have access to an excellent inventory management system already.
Though Shopify is better known for its eCommerce website building software, its inventory management is rather impressive as well, especially if you focus your attention mainly on online selling. It’s easy to use, with basic inventory features like unlimited products, automatic shipping rates, bulk import/export, customer segmentation, and more. It also offers numerous integrations. However, if you’re looking for more advanced features, you may have to purchase third-party add-ons for additional functionality.
Shopify’s subscription plans start at $29 a month, which includes not only inventory management features but also an eCommerce site.
While Square may be better known for its payment processing and POS platforms, its inventory management function is worth looking into… especially for new businesses, since it’s completely free.
Square offers a decent set of features at an unbeatable price, with easy setup and unlimited items. It allows you to print barcode labels, turn on low-stock notifications, sort your items into categories, manage vendors, and more. While its free plan will likely be sufficient if you’re just starting out, you can always upgrade to a paid Square for Retail plan if you find yourself requiring more advanced features.
What Inventory Management Method Should I Use?
The best inventory management method and platform really depends on the software you’re already using to power your business and the features you’re looking for.
If you’re interested in an accounting and inventory management combo, QuickBooks is a great choice. It’s relatively affordable and can help you stay organized in multiple areas of your business.
If you’re looking for inventory management that’s best for eCommerce, Shopify might be the way to go. (Especially if you already use Shopify to sell online!) It’s relatively affordable and comes with highly customizable, easy-to-use online selling features.
If you’re looking for the most affordable option, Square’s your best bet. After all, you can’t beat free, and Square offers good features and unlimited products totally free of charge.