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Revel Blog | Julie Holkeboer | November 3, 2020 |


Small Business Inventory Management: Tips & Solutions

Your Etsy store is more popular than ever. Your comic book store’s sales are skyrocketing. Your personal baking business is hot! But, there’s just one problem! You don’t have enough of your best-selling items in stock. Welcome to the challenges of small business inventory management . Inventory for small business can be just as complicated as inventory for a large business. In both, there’s generally never enough time to execute every task. As a result, inventory management is often an afterthought, consigned to a notebook or an Excel spreadsheet. However, getting a handle on your inventory management can unlock opportunities for growth. Expand the possibilities for your small business as we explain what small business inventory management is and why it should matter to you. We’ll also discuss how to create an inventory system for small business.

What is Small Business Inventory Management?

Small business inventory management is the science of managing inventory and supply in a small business setting. While it’s similar to inventory management practices found in larger businesses, small business inventory management has a number of challenges that make the practice unique. Unlike other businesses, small business inventory management traditionally uses a FIFO regime (first in, first out.) FIFO is favored for small businesses, especially those that deal with perishable items, like restaurants and bars.  

How to Create a Small Business Inventory System

When you start setting up an inventory system for small business , you need to identify basics like inventory turnover, price tracking, and product categories.  All good inventory management software for small business es should consider these factors:


Your business inventory system should always track price data as a trend over time. This can help you track the effectiveness of sales and determine when to clear out underperforming inventory while controlling warehouse costs.


Ultimately, running a business is about successfully filling market demand. Creating categories for your products and then tracking their performance will enable you to understand what your customers want. By tracking product performance over time, you can cut back on ordering underperforming products and increasing orders for products and categories that do well.


Warehousing and real estate costs are a huge number on any income statement or balance sheet. Being able to deliver inventory as needed helps you maintain a lean inventory flow. You only want the inventory present that you can immediately sell – no more, no less. The best place for inventory is where the customer wants it. Location tracking for inventory is a must, as well as features for manual inventory counts.


It's all about time. Make sure that you have procedures in place that will track inventory turnover (time spent on product/service from supplier to sale). Obviously, the shorter the turnover time means the more quickly sales take place – always a good thing! 

Tips for Using a Small Business Inventory System

Here are a few tips to help you create a simple inventory system for small business , and a few pitfalls to avoid:

Get rid of the spreadsheets

Spreadsheets are standard in most businesses, but substituting Excel for a true small business inventory platform is a mistake. Small business inventory software can tie into your POS software and the systems you use for accounting. As such, it provides a clearer picture of your business.

Check inventory regularly

This is vital to any business, but many small business owners regard inventory as boring or irrelevant. However, overlooking the importance of conducting weekly and monthly inventory audits is a big mistake! This is especially true if you deal with products that have a quick turnover. This also helps prevent shrinkage and fraud.

Keeping prices, KPIs, and categories current

Prices and the benchmarks you set for yourself should be reviewed weekly, along with inventory levels. Items should be categorized into A, B, and C categories, with “A” items selling quickly, “B” items selling at a moderate pace, and “C” items selling slowly.  You can clear out “C” items using sales and clearances and shift items to the appropriate categories as you work to improve your sales flow and supply chain.

Mistakes to Avoid

These are some common mistakes that occur when creating an inventory management system for small business .

Not considering low cost, cloud-based tools

There are now many low cost inventory tracking tools that can tie into standard accounting systems. The more you can unify your business reporting systems, the better. 

Not developing a forecasting regime

Working with your accountant or a consultant to develop forecasting is worth the investment. The ability to forecast sales will save you large amounts of money in the long term.

Failure to look at shipping alternatives

The lower the costs of distribution means more profit for you. Drop shipping is an alternative that all small businesses should consider, for example.

Small Business Inventory Management: Increasing the Bottom Line by Inventory Control

At Revel systems, we work with businesses of all sizes to implement systems that help them understand their inventories and help them lower their costs. If you want to learn more about inventory management for small businesses as well as our iPad POS system , contact us. We’d love to help you!