How do small businesses efficiently manage their inventory using QuickBooks?

      This post is shared in paid collaboration with QuickBooks.

      Small businesses efficiently manage inventory by ensuring they have adequate stock to satisfy demand without overstocking. They achieve this by monitoring the items in stock, analyzing sales trends, and determining reorder schedules with straightforward guidelines and routine reports.

      Software like QuickBooks can assist small businesses in more accurately overseeing inventory with less manual work by recording purchases and sales, monitoring stock levels, and highlighting low or slow-moving products.

      Key points:

      - Effective inventory management prevents stockouts and overstocking, which helps safeguard cash flow.

      - It’s essential to have a single reliable system to maintain item lists, movements, and basic reorder guidelines.

      - QuickBooks can serve as that system, enabling small businesses to operate inventory efficiently.

      What does inventory management involve for small businesses?

      Efficient inventory management entails satisfying customer demand while minimizing the waste of resources, including cash, time, and space. This means accurately tracking stock, recognizing which items sell faster than others, and establishing straightforward rules regarding when to reorder and how much inventory to maintain.

      The goal is to avert stockouts and overstocking while keeping the process manageable for a small team.

      Strategies for efficient inventory management:

      1. Identify the items that require tracking: Concentrate on products that significantly drive sales or are difficult to replace. Errors concerning these items will most heavily impact cash flow and customer satisfaction.

      2. Create a clear inventory list with essential item information: Assign a unique name or code, a unit of measurement, and a simple category for each item to enable grouping related products during stock and sales reviews. In QuickBooks, this information is available in the products and services list.

      3. Choose a dependable system to monitor quantities and values: This could be a spreadsheet, a dedicated inventory management tool, or accounting software with inventory capabilities. Certain QuickBooks plans (like Online Plus and Online Advanced) allow you to enable inventory tracking in settings and classify items as inventory, non-inventory, or services, facilitating the tracking of purchases, sales, and stock on hand.

      4. Ensure all purchases and sales are recorded in the same system: Effective inventory management necessitates recording stock movements consistently in one place. QuickBooks updates quantities and accounting entries automatically when bills, invoices, and sales receipts for inventory items are entered, negating the need for separate stock spreadsheets. It also updates the quantity on purchase orders for inventory that is on order but not yet received (available in Plus and Advanced plans).

      5. Establish simple reorder points to guide purchasing decisions: A reorder point represents the stock level at which it's best to place a new order, considering lead times and safety stock. QuickBooks (in Plus and Advanced plans) can store reorder points and alert you to low or out-of-stock items so you can assess them, prioritize, and create purchase orders before depletion.

      6. Utilize reports to identify trends and make necessary adjustments: Regularly analyze which items are selling quickly or slowly, as well as how much cash is tied up in inventory. QuickBooks inventory and sales reports provide insight into quantities on hand, items needing reorder, and overall inventory value, enabling adjustments in order sizes or discontinuation of poor performers.

      7. Reevaluate processes and tools as the business expands: As order volumes or sales channels grow, assess whether your current combination of spreadsheets, software, and inventory applications still meets your business’s requirements. For instance, scaling businesses might start with basic methods and subsequently integrate more specialized inventory tools with QuickBooks as their requirements evolve.

      Fundamental principles of efficient inventory management for small businesses:

      | Principle | Example |

      |-----------|---------|

      | Maintain an accurate view of inventory | Keep one item list and track quantities in one primary system |

      | Reorder at appropriate times | Set reorder points based on lead times and demand; utilize low-stock lists or alerts |

      | Minimize manual data entry | Record purchases and sales once (use a standardized form if using QuickBooks) |

      | Recognize items that impact cash flow | Review reports on fast and slow movers and inventory value before reordering |

      This table outlines efficient inventory management principles along with examples of their application.

      QuickBooks use-case: implementing efficient inventory management principles

      A small home goods shop aims to avoid both empty shelves and excessive storage boxes. The owner transitions key products from an Excel spreadsheet into QuickBooks Online, which they already employ for accounting.

      They import their product list from the spreadsheet, designate item types, and document purchases and sales using standard forms. Inventory quantities now update automatically, low-stock alerts notify the owner when to reorder best-sellers, and inventory reports reveal slow-moving products that may need reduction or discontinuation.

      As a result, the owner spends less time on manual inventory counts, allowing more focus on customer service and future business planning.

      Checklist: establishing inventory management in QuickBooks

      1. Choose a QuickBooks Online plan with inventory capabilities.

      2. Enable stock or inventory tracking in the settings.

      3. Import products and services from Excel or CSV using the import data