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Tapping into your inventory’s strategic value

Four ways to turn inventory management into a catalyst for growth and profitability

As daunting as inventory management can be for a small business owner, it’s a critical component of success. Good inventory management practices can lead to strong cash flow and provide valuable insights about which products are most popular and most profitable. Those benefits can help refine your growth plans and improve the overall health of your business.

In a lot of cases, however, small-business retailers still use manual processes like spreadsheets or written records to track their inventory. Those processes can leave you vulnerable to errors that can hurt profits and slow growth. And bad inventory management practices can lead to having too much or too little inventory—or dead stock, which takes up valuable space indefinitely.

To kick-start your inventory management improvement efforts, start with these four areas:


Run reports

You can’t make the right decisions without the right information. And when it comes to managing inventory, having the appropriate data at hand can help you make better and more informed decisions during that process.

The information from these inventory management reports can yield better insights into which products sell well and which don’t, as well as current levels of stock—and how long that inventory has been sitting around.

A clear picture of current inventory and historical sales trends can help ensure you have the right mix of products at the right time. It also can offer a key indicator in helping you determine the value of your inventory.

Know the value of your inventory

Your inventory is more than the products you sell—it’s also one of your business’ greatest assets. To get a handle on its value, calculate your inventory’s cost over a given time period by subtracting your cost of goods sold from your total cost of inventory.

“You should be able to quickly see your inventory value and worth at any different point in time,” advises Dave Carlson, co-founder and CEO of Shopventory, an inventory management software company. He notes that accurate inventory counts will keep your accountant happy at tax time, and the value of your inventory can even serve as loan collateral if necessary.

Knowing the total value of your inventory is only half the story, however. By classifying your inventory based on cost, you’ll be able to identify which products are the most valuable to your business. You can then devote more resources to managing those portions of your inventory while spending less time and effort on lower value items.

Focus on your employees

Employee theft accounts for 33% of inventory shrinkage.1 That’s one reason why it’s so critical for retailers to have trustworthy employees. To that end, consider strengthening your hiring process with additional screening measures such as background checks or integrity tests.

You also can protect against employee theft by periodically auditing inventory counts. And consider splitting up inventory management tasks to reduce the risk of employees manipulating the numbers. For example, have one employee run reports while another physically counts the stock. Some point-of-sale (POS) devices allow you to control which employees can see or edit inventory reports, giving you an extra measure of safety.

Multitask with your POS device

Nearly 50% of small-business retailers wish they could manage their inventory using their POS system.2 Fortunately, many of these retailers’ systems go beyond just accepting payments: Some offer inventory management tools that can run reports, show real-time inventory levels and offer a snapshot of inventory across multiple retail locations. And as POS devices have gotten more sophisticated, so have the tools they offer. Some now offer a complete solution, helping log stock as it comes in, running reports, and providing real-time data across multiple business locations.

Upgrading and streamlining your inventory management system can lead to better insights, stronger planning and improved profitability. It can also save you stress and give you back one of your most valuable resources: your time.


For more tips on unlocking the value of your inventory, watch the webinar, “Know your stuff: Embrace the strategic value of inventory management” for free and in full here.


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