Inventory Management for Small Business

There are millions of small businesses throughout the United States.  Small businesses have some unique challenges because they have the same duties to fulfill as their larger counterparts but without the massive budget or staffing to get it done.  Whereas a large company can hire specialist in every area, a small business often requires one person to where multiple hats.  This is often the case when it comes to inventory management.  Bookkeepers and Warehouse Managers are often tasked with keeping inventory information up to date without a proper system in place to do so.

Companies can lose money by not having a proper inventory management system.  Handwritten tracking is simply not efficient.  The only person able to access the information is the person that did the count.  The warehouse staff, sales team, bookkeeper, and operations staff need to know the inventory count for every item a company carries at all times.  Without detailed reporting the sales team cannot take orders, for fear that they won’t be able to fulfill.  The operations staff can not accurately order more product because they do not know what they need or how much of each item.  The bookkeeper cannot supply ownership with an accurate balance sheet without a full inventory count.  Departments throughout the organization depend on accurate inventory management in order to perform their daily job duties.

It is shocking to me how many businesses do not have an accurate inventory management system.  I was speaking with the Chief Quality Officer at a consumer products company, that has an average of $9 million in sales every year, and she said that the warehouse workers would do a manual count when a sales order was submitted.  No one in the office knew exactly how much product was on hand.  When a sales person took a large order it would cause chaos as everyone scrambled to see if they had enough product to ship that day.  Since this didn’t cause problems with the daily online sales the company operated this way for several years.  They just started looking for a solution because they realized that they kept running out of product.  As commercial sales grew, they were not ordering enough stock to keep up – all because they didn’t have an inventory management system.  This has caused them to lose some of the customers they worked so hard to get.

If your company does not have an inventory management system in place here are options to explore:

  1. Spreadsheets on a shared drive.  This is the most rudimentary system.  If you have zero budget for an inventory management system it will work temporarily.  Sign up for a free Google email account.  In the Google Drive create a new spreadsheet and “share” it with everyone that needs inventory information.  Everyone on that list will have access to the spreadsheet at all times which prevents multiple versions from being passed around the office.  Whatever is on the shared spreadsheet needs to be the accurate and current count.
  2. Quickbooks.  This popular accounting software has an inventory management system.  The benefit of using Quickbooks is that the information for inventory integrates with both the Profit and Loss and Balance Sheets.  The challenge is that the system can be difficult to use and is easy to make mistakes on.  Once the inventory is off, getting it back on track can be very time consuming.
  3. Business! Professional.  This accounting software is Microsoft Access based and very user friendly.  The benefit to the system is that it is fully customizable.  You can change fields and forms as needed to comply with the specific requirements of your company.  For visual people, the inventory management system has a graph to quickly show stock levels.
  4. Custom Software.  There are companies that can custom create inventory management systems for you.  Companies like Oracle will send representatives to your office, meet with you and design a solution.  This option is expensive so you may want to try Quickbooks or Business!Professional first.

Inventory management is crucial to business operations. It can help you make more money by ensuring the sales team has products on hand to give customers.  Simultaneously a business can save money by only ordering the inventory they need.  Stocking up on items that you have surplus of takes away cash that could be used for other things.  Investing in an inventory management system will make your business run more efficiently and save headaches down the road.

Bethany Wood

Bethany Wood is a serial entrepreneur and has started several successful companies in a variety of fields including manufacturing, distribution, consumer goods, financial services, marketing and consulting. She is currently the President of SEI International and has business interest in the US, India and China. As an entrepreneur Bethany is constantly finding opportunities to expand SEI’s holdings and as a business owner she is continually learning new ways to improve business performance. As a writer Bethany contributed to and edited the Back to Basics management book.

More Posts - Website

Follow Me:


  1. says


    Good points you make about the upside of inventory management software.

    Another point to remember – those systems are only as good as the people and processes behind them. If there are problems in either of those areas, the automated inventory system will still be lacking the accuracy needed for the business to benefit from it.

    Scott Gregory, QuickBooks Expert

  2. says

    Very good explanation why companies benefit from using inventory systems. The general rule could be that if you can’t count your inventory in under an hour you should have such system in place. In many counties it’s also mandatory for companies above some size.

    I would just point out that there are many online solutions for inventory management also that might be cheaper or easier to start with for ordinary small businesses. Few most known seem to be Clearly Inventory, Unleashed software and inFlow. The additional benefit is also that they also work on tablet devices (through web-browser or native in some cases).