Running a small business is no easy feat. It may be hard to believe, but one of the top reasons small businesses fail is because small-business owners can’t figure out how to properly manage their inventory. In fact, 46 percent of small businesses with 11 to 499 employees don't currently track inventory or use a manual process. Often this leads to buying too much stock that wastes away on shelves or not buying enough and risk losing customers.
Either way, this issue can have a major impact on a small business’s bottom line. Unfortunately, many small-business owners pass on an inventory management system because they haven’t yet found a system that fits their business model or don’t know where to look.
What should you know about inventory management? Shawna Hamilton Doster, owner of GLOsquad, a skin-rejuvenation treatment company; Stephen Cheung, owner of the restaurant Lavagna; and Brian Sutter, director of marketing at Wasp Barcode Technologies spoke with OPEN Forum about the inventory management systems they use, the biggest mistakes you should watch out for, and tips on implementing proper inventory management.
What inventory management options do you use, and why do you use it?
Shawna Hamilton Doster: We use a software company called Booker. A lot of salons use it because it books all your appointments, but also has accounting, inventory management functionals. It's Web-based and charges a monthly subscription fee.
If I had to figure out how to do booking, accounting, inventory and run reports, it would be impossible. We do everything off of an iPad. All we have to do is enter in our inventory. Once you enter in your products and inventory, it will give you low inventory alerts. There’s even a function that can reorder for you
Stephen Cheung: We basically keep track of everything using QuickBooks. We’re a small business so we don’t have the resources to keep track with a bigger system. We don’t use much of a system, per se. A lot of it is due to experience and running the numbers. We make everything in-house. We don’t buy cans or preserved stuff. We count our liquor monthly. The key with restaurants is that the food is perishable. The fresher the food is, the better it tastes. Restaurant owners need to know their menu item, the menu mix, what sells, what doesn’t sell.
What are the biggest mistakes small businesses should watch out for when it comes to inventory management?
Doster: Not keeping up or paying attention to your inventory system because, unfortunately, a lot of mistakes are made with new employees and there's a lot of loss, whether it’s theft or things that are misplaced.
From a security standpoint, inventory is expensive. We are able to know, without having to count, when we’re out of one of these products. The biggest mistake that businesses make is that they don’t use formal tracking.
Cheung: As far as restaurants, the biggest mistake comes down to the food ordering. Not so much stuff is stolen, but being wasted. We’re pretty good with it. It takes a cautious eye and vigilant staff. I say our food waste is less than 5 percent per month.
Brian Sutter: Make sure you barcode your location labels and your inventory. This will help ensure receiving and audits can be a quick and accurate process. Conduct regular—recommended monthly—cycle count audits to spot check your inventory, and quarterly audits of your entire inventory.
Do you have any tips on implementing proper inventory management?
Doster: It’s really important to train yourself on all the functions and know what you’re doing. And practice, because it does take some time to ramp up and get familiar and be fully educated on the software that you’re using.
Sutter: My biggest tip is just to get started. By utilizing an automated inventory system, you can quickly increase your inventory accuracy. Barcode your inventory and location labels. Conduct an inventory audit to ensure all quantities in the system are accurate.
Cheung: Choose the right system. If inventory management is too expensive and too hard to use, ultimately if nobody uses it, you’re out. If you’re a retail store, you should definitely have a system. A lot of modern POS systems can do that for you.You’re just wasting money. It’s more along the lines of using it and using it properly.
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