How to Manage Business Inventory

female clothing store owner checking inventory, how to manage business inventory

Estimated reading time: 5 minutes

If your small business sells goods, items, or parts, you need to know how much inventory you have at any time. This can help ensure that you fulfill your customers’ needs and avoid running out of stock, which can result in missed sales opportunities. However, inventory management can be complex because it involves many moving pieces. Plus, there are many different options to consider that are based on your type of business, the amount of inventory you have, and your supply chain requirements.

This Balboa Capital blog article explains the basics of managing business inventory and its vital role in your company’s success. You will also learn what to look for in an inventory management software system, should you decide to invest in one or upgrade your current system.

What is inventory management?

On the surface, inventory management is a simple concept. You must make sure the shelves are fully stocked so your customers can find what they want. However, this is easier said than done, especially if you also sell products on your website. So, we think it would be helpful to provide you with a refresher course in inventory management.

Simply put, inventory management is the process of monitoring and controlling the flow of products from your shelves to the cash register. The same applies if you have a website with e-commerce capabilities. Managing your business’s inventory includes maintaining a database of products, their quantities and locations, and their prices. Knowing where all products are located will help you determine which items need more attention when it comes to pricing or advertising or which ones need more attention when it comes to restocking them with new inventory.

Inventory management software.

Paper-based inventory is becoming a thing of the past for businesses of all sizes and in many industries. Business owners are ditching spreadsheets and investing in inventory management software, which offers many benefits. For starters, the software improves inventory accuracy because it works in real time. Next, it syncs with other technologies, such as a point-of-sale (POS) system. Most POS systems are equipped with tools to keep accurate tabs on inventory that are designed to help optimize each step of the supply chain. Finally, inventory software can help you and your employees save time and be more productive because inventory management is automated and digitized.

When choosing a software system for your business, you should look for one that meets your needs, works with your budget, and can be scaled as your company grows. It would not make sense to invest in an expensive, robust software system with features and capabilities that you will never use. There is a seemingly endless list of software providers, so take your time and conduct research to find what works best for you and your business.

Determine how much stock you need.

It is simply not possible to predict how much you will sell in the future. That said, you can get a good idea of potential sales volume by looking at your historical sales results. Let us use a toy store as an example. In the fourth quarter last year, the store’s revenues increased 50% over the previous quarter. So, the toy store owner analyzed sales trends and determined the fourth quarter sales this year might also see a significant increase. As a result, the owner contacted vendors early and stocked up on inventory to avoid losing sales in the year’s final three months.

The example above is based on a quarterly sales projection, but it is a good idea to maintain a sufficient amount of inventory all year long. Also, consider any planned promotions or discounts and advertising efforts that might generate more sales and require you to purchase more stock. Lastly, always remain aware of external factors that can increase or decrease the demand for the products you sell. For example, the market demand for a popular product will spike if the supply begins to run low. On the other hand, outdated or obsolete products might collect dust on your shelves and warrant a clearance sale.

Do not wait to stock up.

Two of the biggest inventory-related mistakes a business can make are not having enough stock in store and listing out-of-stock items on their websites. In each of these scenarios, the company will lose sales and risk losing customers in the future. Today’s shoppers expect everything to be ready to purchase when they visit your shop or website. So, contact your vendors and suppliers when your inventory begins to run low, and stock up before the shelves become empty.

Lead time with vendors and suppliers is crucial, particularly for items and products that require unique parts or are on backorder. You can stay ahead of the curve by regularly monitoring and managing your stock levels and contacting vendors sooner rather than later. In addition, your vendors will not have to deal with last-minute time constraints that might require rush shipping costs.


Managing your inventory is not an easy task. It requires a lot of time and effort. But it is something that you need to do if you want to make sure that your business is running smoothly. We hope this article has given insight into how managing your inventory can help you sell more products, work efficiently, and deliver on your customers’ expectations.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.