Small Businesses: Are You Tracking Your Inventory?
Published on 6/10/2014

Small Businesses: Are You Tracking Your Inventory? Most small businesses require some sort of inventory in order to operate. Having inventory and selling it for a profit are essential to the growth of a company. However, managing inventory can be a real challenge. Some parts of your inventory are inevitably going to move faster than others. There is no optimal speed for inventory to move; every business works differently.
Slow-moving inventory can be a real problem for businesses. Inventory that sits on the shelves for weeks or months on end is nothing more than wasted money. Cash is needed for a business to grow, so it’s imperative that companies avoid committing too much of it to inventory. Here are a few simple rules to remember when

tracking your inventory

  1. Know what you have and where it is.  Although this tip sounds like common sense, there are plenty of businesses that that don’t count their inventory often, or even at all. It’s impossible to make the right decisions if you don’t know the state of your inventory. Counting inventory might take time, but investing in a barcode system can turn days of work into hours.
  2. Know what you’re selling or producing and at what rate.  This rule may also seem like common sense, but it’s something to keep in mind. When you run out of a particular item or product, don’t just buy as many as you ordered before. Instead, consider how much of that product you move in a week, month, or quarter and go from there.
  3. Bring in new inventory in smaller increments and more frequently.  Instead of buying products in bulk and paying one large bill, consider buying more frequently. This allows you to hang onto your money longer, and it also makes the cash flow more fluid.
  4. Avoid FISH inventory at all costs.  FISH stands for “First In, Still Here.” If the sale of an item is slowing, or has even stopped, you should know to stop buying more. Don’t let a supplier try to convince you with a good deal; only buy what you know will sell. FISH inventory can force you to sell items at a discount, or you could end up eating the cost entirely.
  5. Consider marking your inventory  with some sort of date or lot code so you’re always using the oldest inventory first. If your old inventory sits around, it could become outdated or even ruined.
  6. Minimize your inventory losses, or shrinkage.  Shrinkage can be caused by a number of things. Carelessness, mistakes, or theft can all cause inventory loss. How can you limit shrinkage?
    • Count your inventory often.
    • Store your inventory properly.
    • If you own a manufacturing company, always scrutinize your Bills of Materials.
    • Train and educate your employees.
While inventory is definitely a “necessary evil”, it can lead to a great deal of productivity and growth when managed properly. Following these tips will help point you in the right direction.
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