7 Best Inventory Management Software for Small Businesses
Thierry Maout • August 12, 2022 • 10 min read
Frequently asked questions about small business inventory software
Inventory management, sometimes called stock management, is the practice for businesses of keeping track of how much product they have in stock at any given time, as well as what they need to order, in what quantities, and when. Essentially, inventory tracking is about making sure there’s always sufficient inventory to fulfill product orders and avoid shortages.
Inventory management can be divided into four categories: Raw materials, works-in-process, maintenance, repair, and operations (MRO) goods, and finished goods. Raw materials refers to materials used to build finished products. They can be produced internally or by a third party. For example, for a postcard company, raw materials could be the paper or ink used in the confection of the final products. Works-in-progress is describing the products that are unfinished and not ready to be sold yet. Continuing with the postcard company, this could describe the postcard as the ink and glue is drying out. Maintenance, repair, and operations (MRO) are other products that are used during production but aren’t part of the final product. As an example, this could describe the molds used to seal the wax on envelopes. Finished goods, finally, are the finished products, once production is completed and they can be sold. In our example, the postcards.
To maintain inventory effectively, small businesses need to accurately track and monitor their sales activity. By tracking sales volume and using inventory management software (more info in the post), SMBs are able to gather insights, enabling them to: - Monitor product performance: What are your top-selling products? What items are underperforming? This will allow you to steer your inventory strategy accordingly. - Focus on your business: Implementing inventory management software allows you to free up time and energy to focus on what really matters. - Identify negotiation opportunities: By calculating product margins and sales volume, you’ll be able to negotiate with suppliers. - Track inventory in real-time: Proper inventory tracking will help you monitor how much of your money is tied up in inventory at any given time.
The two methods of inventory control are manual and perpetual. Manual inventory control (also called physical inventory control) refers to a method of inventory control where you’ll periodically go and count each item in the inventory, comparing your results with previous values to keep track of everyone coming in and out. Perpetual inventory control, on the other hand, continuously keeps track of products in the inventory through dedicated software, and automatically monitors everything that is sold and/or purchased. Note: Neither type of inventory control removes the need to inspect products. You still need to make sure they’re not damaged or haven’t disappeared.