How to Handle Inventory Efficiently as a Small Business


Managing inventory for your small business carefully and efficiently is a best practice that helps you gauge the health of your business and plan for the future. An example is knowing when you are overstocked on a particular item or understocked on a highly requested item, all at a glance. This assists you in planning, preparing, and putting things in place to ensure the smooth operation of your business.

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However, handling inventory can be a time-consuming task, even for large businesses. As such, mistakes can occur, resulting in costly problems down the road. Fortunately, you can avoid making errors by implementing an accurate, seamless, and scalable inventory management process. Here is how to do it:

1. Build a Good Relationship with Your Inventory Supplier

It is critical to know your product suppliers well to manage your inventory efficiently. Maintaining positive relationships with your suppliers will benefit your supply chain.

Even if you manufacture your inventory, this is still beneficial to you. How else will you be able to ensure that you always have the resources you need to make more products at a moment's notice?

You should also know everything about the products in your inventory: country of origin, barcode and lot number data, cost of the product over the time you have stocked it, and its cycles of scarcity, if applicable. This will help your business plan more efficiently to meet the demands for each product it offers.

2. Organise Your Inventory

As a small business owner, you must keep track of your inventory's stock levels at all times. One of the best ways to stay on top of this is to categorize your products. If possible, your inventory should be classified into three groups - A, B, and C.

Put your more expensive items which sell slower but have a higher profit margin in group A.

Group B is a good place to put products that are less expensive but sell faster, albeit with lower margins, than products in Group A.

Finally, group C is ideal for smaller, low-cost items that sell quickly but do not have a high-profit margin when compared to items in groups A or B.

Speaking of inventory management, many businesses have also started to look into efficient ways to cut and handle materials. For instance, the use of automated slitting machines has revolutionized the way some industries prepare their products for packaging and delivery, ensuring accuracy and speed in the process.

3. Practise the 80-20 Rule

This is a simple rule that helps you maximize your inventory well and keep sales humming along at a brisk pace. It simply states that 80% of your profit should come from 20% of your inventory.

These are the high-priced items that don't sell very often but are always in high demand. Having said that, keep an eye on these items. This allows you to efficiently manage your stock levels and avoid running low or overstocking on them. Also, keeping an eye on this tells you when the market trend could be going up or down.

4. Order Restocks Yourself

Some suppliers will offer to restock their products for you regularly if they recognize you as a regular client. This is a good idea because it saves you the time it takes to prepare purchase orders for the items you need regularly. It is, however, always better to err on the side of caution.

As a small business, you don’t have the capital to weather just any storm. Market trends can turn on a dime and leave you with stock you do not need and have no way of disposing of. As such, try to understand your inventory requirements and order your supplies yourself. This way, you can ensure that you only save money on the stock in the long run.

5. Store Inventory Using the First In, First Out Rule

It is simple to put new items at the front of the shelf and push old ones to the back. However, this is bad for perishable items or items with an expiry date, and even items with a longer shelf life can suffer if this practice is repeated. This also harms your sales.

Items should be sold in the order in which they are received. Newer items should be pushed to the back of the shelf, while older items should be pushed forward to make it easier to remove them.

6. Track All Sales

Understanding what sells, when it sells, and at what price is the lifeblood of your business. Many businesses simply calculate daily sales and ensure that it tallies with their remaining inventory before ordering more. It goes deeper than that.

Analyzing the collected data and understanding what is selling, what is increasing in sales, and what is decreasing in sales, as well as why can help you manage your inventory efficiently.

Can you bundle or restock certain items that sell well together?

If you notice some items sell well at certain times of the year, consider only stocking them seasonally.

Are there products that have fallen out of favor? It would be a bad decision to restock them.

The valuable data you gather and analyze by tracking sales activity can help you avoid costly inventory management mistakes.

7. Schedule Regular Inventory Audits

Auditing your inventory is a tedious business task, and it may be tempting to put it off indefinitely. It is, however, far worse for your small business to lose critical operating capital as a result of sloppy inventory auditing or failing to audit at all.

You can audit your stock on a weekly, monthly, or yearly basis. However, as a small business owner in a modern business environment where sales can be brisk and you must immediately cater to your customers' demands, frequent inventory audits are essential to avoid losing a sale.

On the bright side, meticulously auditing your company's inventory does not have to entail physically counting stock every day. Consider using POS solutions to easily automate and count your inventory, relieving you of the burden of physical inventory auditing.

8. Prioritise Quality Control

Make certain that your stock is always in good condition. This is especially important if you manufacture your products. Even if you only stock pre-manufactured goods, you should also take care to ensure that your products look good and function properly.

Set a standard for quality control and ensure that goods in your business inventory are regularly inspected to ensure that they continue to meet these standards.

One Last Thing: Get a Good Inventory Management System

Investing in a good inventory management system is now a no-brainer in today's fast-paced world, where consumer trends and product demands can shift in an instant. It would be nearly impossible to keep up with the market's ups and downs on your own, and you would miss out on valuable data that could help your business grow.

A good inventory management system should allow you to see data at a glance, which aids in forecasting and ordering. It should also aid in alleviating some of the strain associated with physical inventory auditing. The Vend inventory management system is a superb example of such a system. The best part is that it integrates readily with any business at any scale.


Ross Smith is the Managing Partner at iPad POS Middle East. Based in Dubai, covering the whole of the Middle East, the company is passionate about helping restaurateurs and retailers alike find the most suitable point of sale system to meet the needs of their business. They specialize in iPad-based point of sales systems and are resellers of Revel and Vend.

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