How to manage small business inventory

When starting a small business, owners often think about things like the storefront, branding, and displays. They think of smiling employees and happy customers. It’s not usually the image of the shelves and cupboards in the back stockroom that fills their heads.

But inventory is a critical component of your business. Sales are made and lost because of inventory control, so they can’t be overlooked or left to sort themselves out. Here are some tips for how to manage inventory for your small business.

Look back to look ahead

Forecasting is vital when running a business, especially if you’re selling physical products. You must know how much of a product you can expect to sell and when.

If a customer comes to your store and you don’t have what they’re looking for, you’ll lose the sale. And if you have too much of something on hand that isn’t selling, you lose money right off the bat, both in what you paid for and what it costs you to store.

When ordering your products, look back year over year to see what you sold and when. This will give you a better idea of how much you’ll need when ordering something new.

This can be tricky, considering the last few years have been anything but ordinary as far as retail traffic goes. Do your best while keeping in mind what was going on at the same time last year and what might be different this year.

Reconcile discrepancies

Research what went wrong if you find a variance when checking physical inventory against what your system says. You could have a case of theft – internal or external. You may have an employee who doesn’t understand how to ring something up correctly. Or there may be a faulty process resulting in too much or too little of something.

Whatever the case, you must know what happened. It’s the only way to correct the problem and get more accurate numbers.

Implement POS software

Modern point-of-sale systems are true game changers in the retail industry. What used to be manual work – marking down sales, going back and comparing that against what’s in the register, and so on – is now all done for you.

With a sound POS system and well-trained staff on how to use it, you only need to audit your inventory when something is amiss. This saves an enormous amount of time and energy.

It also makes forecasting easier, which helps you make good decisions when ordering more products. It’s a win all around and is a must for every business with inventory to manage.


As products arrive, they should also be sold first (first in, first out). This keeps your inventory from spoiling, expiring, or becoming out-of-date. Electronic products may have depleted batteries if left on the shelf for too long, resulting in a poor customer experience. Fabric products can gather dust or become unfashionable.

No matter what you’re selling, it’s a good practice to follow the principle of first in, first out. It keeps everything fresh, and you don’t risk losing money on products becoming stale (literally or figuratively).

Consider hiring a stock controller

If your inventory management tasks take over your whole business, consider outsourcing the job. A stock controller manages all the day-to-day inventory movements of a business. Their job is to ensure you have what you need when you need it.

Final thoughts

Owning and running a business with inventory can be fun and rewarding, but it’s not without challenges. Put in place some solid inventory controls, and you’ll find yourself maximizing profits and pleasing customers.

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