Small Business Success: 5 Tips for Effective Inventory Management

Too much or not enough business inventory can have a detrimental impact on everyday operations. Customer service can suffer if you don’t have enough of the stock you need. If you have too much, you risk cashflow issues, spoilage, and profit loss when you need to sell it at clearance prices just to get rid of it. 

With that in mind, inventory management becomes a crucial consideration in the average business. Struggling to know where to start? You’ll find some helpful tips below.   

Perform Regular Audits

Some business owners only perform audits infrequently when they remember. Something might have sparked their memory, such as searching for promotional merchandise ideas to introduce thousands of new branded goods into their business inventory. 

However, you might be able to enjoy more knowledge of your physical inventory and pick up any errors and inaccuracies by performing regular audits. If you know a full-scale audit will be time-consuming, explore a cycle counting system. Counting a portion of your inventory on a set schedule may mean fewer full audits. 

Try Inventory Management Software

Your employees are likely competent people who are good at their jobs. Still, that doesn’t mean they don’t make mistakes. You might enjoy fewer mistakes as far as inventory is concerned by implementing inventory management software. 

Such software enables you to automate your inventory processes for more efficient operations and even increased profits. They have several helpful features like inventory barcoding, forecasting, and tracking. The demand forecasting feature can be particularly helpful for business owners to know how much stock they’ll need for particular times of the year based on previous sales. 

Set Periodic Automatic Replacement (PAR) Levels

PAR levels, also known as periodic automatic replacement levels, are a type of inventory control system telling you how much of an item to have in stock to meet expected demand. Setting these levels before ordering new products can prevent you from ordering too much or not enough. 

PAR levels are easy to determine as part of inventory management software. You can also adjust the levels based on lead times, fluctuations in demand, and seasonal trends. 

Use a FIFO System

Most experienced business owners already know the importance of a first in, first out (FIFO) system. This system ensures that your oldest inventory is sold or used first. If you haven’t already implemented this system, now is the time to start. FIFO can reduce the risk of expired stock going to waste. 

However, FIFO can also be a desirable approach for assets. Any assets you acquire first should be sold or disposed of first. This prevents you from having old, outdated equipment with high maintenance costs. 

Provide Staff Training

As a business owner, you might know how important inventory management is. Still, that doesn’t mean your employees do. If you haven’t imparted the right knowledge and information, there’s a chance your employees won’t take the same actions you would to ensure the best inventory management practices. 

Take the time to train your employees on your expectations for ordering and selling new stock. The more they know, the more organized your inventory can be. It also doesn’t hurt to provide refresher training when practices or stock levels change. When information is fresh in their mind, they may be more likely to follow your preferred procedures. 

Managing a business’s inventory can be challenging. There can be times when you’ve ordered too much stock, not enough, or have lost it due to spoilage. While some stock-related challenges aren’t avoidable, they may be less frequent through proper inventory management systems.