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It’s not uncommon to believe that small businesses have an easy time when it comes to managing resources and inventory. In reality, whether you own a large company or a small boutique, an inventory management system is key to becoming and remaining successful.

Small business inventory management has become increasingly important because of how much technology has changed our ways. Almost everyone tries to get onto the online marketplace, advertise with social media. So it can be hard to balance it all when you get feedback from so many places at the same time.

Often times this can lead to having a poor inventory management system. Products go missing, funds are misplaced, and employees blamed. To avoid these types of situations you can use certain tools that make it easier to manage the inventory.

As this article will show you, by just following a few simple steps, you will be able to setup a good inventory management system and make sure no internal issues affect your profits.

Reviewing Supplies

As absolute as math is, machines aren’t perfect yet. Even if you have a good inventory management system that uses inventory management software and that’s monitored by employees, you can still get false-positives or false reports.

If you often encounter discrepancies it’s a good idea to take matters into your own hands. Doing your own local audit and rechecking all your stock can help you eliminate any confusion. Maybe your software needs some tweaks or maybe you need to rethink your organizational approach.

Sometimes these mismatches can happen because something is wrong with your storage. Perhaps those that handle deliveries aren’t working efficiently. Sometimes it can just be a human error such as someone forgetting to input the data of a new transaction or matching it to your inventory. Either way, having good small business inventory management is of utmost importance.

Of course, you don’t have to do internal audits just when you encounter problems in your inventory management system. The occasional analysis of how the operation is going, checking what’s coming in and what’s going out to partners or vendors can help prevent future discrepancies and potential financial loses.

Prioritizing Sales

If you’re familiar with the phrase ‘ First come, first served’ then you will understand the next step better than others. If you’re in the business of selling something this expression applies to your model. In business, it is called FIFO and it stands for ‘First in, First Out’.

This means that you should always try to push your products out the shelves as soon as you get them. This makes more sense for businesses that deal with perishable products such as food and beverages. Either way, a good inventory management system can help you keep track of when products of a certain type arrive. That way you can make sure that nothing goes to waste and neither you nor your partners lose money.

Cataloging Products

You may think that the way you arrange your products can be random because it shouldn’t make a difference. If that’s the case then you’re obviously not familiar with the ABC Analysis method that most successful companies use.

This is a hierarchical inventory method that sorts products based on their importance. For most businesses this means A would be the number one seller, B would be second in line, and so on. This is an important aspect to keep in mind if you want to have a good small business inventory management system.

The A category will have products that total around 20% of the inventory. They have a consumption value of about 80%. This is based on the Pareto principle which imposes the 80/20 rule or that 80% of your profits can come from just 20% of your products.

Category B products will be somewhere in the middle. They make up around 30% of your stock while the C-products make up the remaining 50%.

What this analysis does for your inventory management system is assign a certain hierarchy that is merit based. Because some products will be more valuable to your business than others you should be aware of which ones they are and treat them as such.

This means that your internal audits should be done at a higher frequency for type A products than type B or C. You need to make sure that your biggest sellers are always on the shelves and that you’re not taking in more orders than you can fill.


These three steps work for small businesses and large companies alike. Having an efficient inventory management system requires a combination of good software, dedicated employees, and thorough reviews of your stocks. If you’re paying close attention to what goes on with your stock you’re on track to have great results.