Good inventory management can make a big difference in whether a small business succeeds or fails. For businesses that sell physical products, knowing how much inventory they have at all times allows them to order, track, store, and ship their products based on demand and keep a better handle on inventory-related expenses. Effective inventory management can also help improve product tracking, monitor theft, and make order fulfillment more efficient.
All of this can be achieved with a robust point of sale system with strong inventory management capabilities. This is especially important as small businesses work to navigate selling in the post-pandemic era.
“Coming out of COVID, [businesses are] facing increased online competition, and people [are] changing the way they shop,” said Will Atkinson, Vice President of Customer Success at POS Nation. “Not knowing what you've got in your store is a huge handicap for a small retailer.”
A company’s inventory process doesn’t have to be complicated, but for it to be efficient and maximize financial flexibility, it does have to be done well. Here’s what small businesses should know about the challenges of inventory management and tips for improving their own processes.
[Read more: 5 Smart Inventory Management Processes for Small Business]
Challenges of managing inventory
Poorly managed inventory can lead to a host of problems for small business owners, including:
Cash management issues
Small businesses are often working on a limited budget. Staying on top of inventory management allows businesses to better understand and plan for inventory-related expenses.
“When you're ordering your inventory, you always want to buy just enough — not too much, not too little — to keep things going,” said Spence Hoffman, Vice President of Sales and Product at POS Nation.
Poor customer experience
Small retailers already face stiff competition from e-commerce giants like Amazon, and many shoppers who opt to visit a store in person are likely there because they don’t want to wait for two-day shipping. Not knowing whether you have what your customer is looking for ultimately leads to a poor in-store shopping experience.
“If somebody bothers to come out to my store and they [buy] two out of the three things they want … they've still got to now go make that online purchase and have that two-day delay,” said Atkinson.
Increased risk of employee theft
If small businesses don't have a tight grip on their inventory — and their employees know it — it makes it easier for employees to believe they can get away with stealing products.
“Employees will take advantage of you if you don't know what's in stock — that's just the nature of the game,” Hoffman said. “If they know that you don't know what’s out there and how many of the items are out there, some of it might go home with them.”
Over or undersupplied products
Businesses that don’t monitor inventory don’t have an up-to-date view of what’s popular with customers and what isn’t moving. This can create a surplus or shortage of items, leading to wasted shelf space for overstocked products and customer disappointment if the items they want are out of stock.
“You don't want to guess that because you're going to get it wrong,” Hoffman said. “You want to have some smart tools in place to help you decide when to order, how much to order, what to order, [and] what not to order.”
[Read more: Top Tips to Slay Supply Chain Snarls]
Get smart software that can take away the burden of keeping track of everything manually. Use artificial intelligence to help you decide what to reorder [and] help you decide how many days of supply you might have for a specific item based on the sales velocity of that item.
Spence Hoffman, Vice President of Sales and Product, POS Nation
Finding the right small business point of sale solution for inventory management
For businesses that want to improve their inventory management, the first step is finding a solution that makes the job easier. A good point of sale tool has inventory management capabilities that help small businesses automate the process of tracking and reordering their stock. This helps small business owners keep an updated and accurate inventory and make informed business decisions.
“Get smart software that can take away the burden of keeping track of everything manually,” Hoffman said. “Use artificial intelligence to help you decide what to reorder [and] help you decide how many days of supply you might have for a specific item based on the sales velocity of that item.”
“Any good point of sale system is going to have BI [business intelligence] tools, AI [artificial intelligence] tools, [and] forecasting,” added Atkinson. “It's a way to look at not only what you have, but what you've been selling to determine what you actually need to order based on real activity and real data.”
Managing inventory for a small shop is a much different experience than stocking shelves at a big-box store. That’s why, when searching for the right point of sale solution, it’s important to find one that focuses specifically on the small business market.
Vendors like POS Nation primarily work with small businesses in the retail space, including liquor stores, tobacco stores, and grocery markets. Learn more about how POS Nation helps small retailers improve their checkout experience, create happier customers, and grow their business at posnation.com.
[Read more: How to Estimate How Much Inventory You Need]
