Stocked up: A small business inventory management guide
At a glance
Here’s a snapshot of the advice from our interviewees:
- Run historical sales reports every 3-6 months to identify trends and/or gaps – then act on them.
- Stocktake more often during uncertain times when consumer behaviours change quickly.
- Identify stock that's not performing for clearance and sale day opportunities.
- Invest in inventory management software that offers the right level of sophistication for your business.
How can you tell which products are your best-sellers or when your customers’ preferences change out of the blue? And what’s the best way to divvy up your marketing spend to advertise specific products? The answers may lie in good inventory management.
It’s not just a process that helps you to stay on top of day-to-day operations and keep a healthy stream of cash flowing through your business. If done properly, it can give you a clear-eyed, strategic view into your business’s future and present opportunities for growth.
But talk of things like EOQ formulas (🤷) can be a little bamboozling if you’re new to this kind of thing – so we’re putting it into plain English. We caught up with Gordana Redzovski, Vice President – APAC for retail management software company Vend, and an Aussie small business owner to help you understand the basics of good inventory management.
Start with the right technology
Gone are the days of having to manage your stock with a pen and paper or put up with issues in your legacy system – a small business owner’s time is too precious for that, says Redzovski.
“Don’t put up with the pain of manual processes and time-consuming inefficiencies across your business. There are so many great tools out there to help you – it really makes all the difference.”
Businesses will have different sophistication requirements around inventory management – for example, a fashion label with stores in multiple states versus a standalone newsagency – so make sure you choose software that offers varying sophistication levels, says Redzovski. It should be able to service you as your business grows.
Inventory management during 2020 and beyond
With many small business owners forced to run the show from home this year, Redzovski says, being able to manage inventory from anywhere has become business critical.
“Business owners need to make important decisions around stock – such as which products need to be reviewed – quickly because throughout the pandemic, consumer behaviour changed so rapidly.”
Having an accurate read on your stock is also helpful when you’re deciding where to promote your products.
In the infographic below, Redzovski offers more helpful advice for those new to inventory management.
A small business perspective on inventory management
Kiri Gorter is the owner of Use Ta! – a pre-loved children’s clothing store in Melbourne. Her inventory approach is a little more complicated than most as her business sources items from the community and sells on consignment; every item must be accounted for and tracked to its consignor.
Image: Kiri Gorter sorting stock at Use-Ta!
“By keeping your inventory organised and making sure your system is well managed, slow-moving stock can be identified and moved into your markdown channels more efficiently, making room for what’s selling best,” says Gorter.
Being stuck in the Melbourne lockdowns, Gorter says there was a sense of time pressure to recover some of the funds lost when they were forced to close-up shop.
“Areas such as inventory management have to be tightened up to make sure every possible dollar is kept in the business,” she says.
“My best inventory management tip is to invest time and energy into getting software that works for you. It could be the back end of your website or a standalone program, but using a good system to track your inventory is helpful to keep on top of what is physically available today, as well as to help planning for the future.”
Doing this helped Gorter to see which items and categories were selling best so she could identify opportunities to make more sales.
“Sometimes that can simply mean sourcing more items in that category, but it can also help us expand into new areas. For example, we noticed that nappy bags sold really quickly, so we started moving into maternity clothing. It’s great to have the data to quantify your gut feelings before you take the risk of investing in more inventory.”
Start 2021 with a clean slate and invest in software that will make inventory management easier. If you need funding to help make this happen, take advantage of a Prospa Small Business Loan.
Subscribe to the Prospa Blog
Be inspired! Sign up to Prospa’s newsletter to receive tips, tools and small business success stories straight to your inbox.