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Will an Inventory List Save Your Small Business Money?

Implementing an Inventory Management Strategy

Managing inventory can be an arduous task for small-business owners. Traditionally, business owners and their employees performed periodic inventory assessments—once a week, once a month, or twice a year, depending on the size of the business. But manual counts are wasteful, frustrating, and frequently inaccurate.

Now a set of tools and techniques exists to help small-business owners monitor active inventory in real time to avoid overstocks and stockouts. Business owners can choose from tools that are as sophisticated as a dedicated software system, or as simple as the inventory control features included with most basic accounting programs.

Creating an Inventory System

One way to build a dynamic inventory system is to begin with an approved inventory list. This is a simple tool to help managers and business owners better understand their inventory needs, and create clear “priority tiers” to separate high-demand items from lower-demand items.

If you’re ready to build an approved inventory list, then begin by tracking customer orders for every available product. Analyze the frequency of orders over a 6-month or 1-year period to determine your list of “top priority” items.

Perpetual Inventory

Perpetual systems of inventory management make real-time assessments and keep a “live” count of your on-hand inventory. A perpetual inventory system can be automated, thus cutting costs related to labor, overtime, and business interruption.

Over time, small-business owners can use perpetual inventory systems to develop a model for maintaining optimal inventory. Utilizing a real-time view of your company’s inventory enables you to set realistic maximum and minimum parameters for inventory.

A key tool in all perpetual inventory systems is some kind of automated identification that allows business owners to bypass point-of-sale information bottlenecks. Bar codes and radio frequency ID tags, as well as applications like SAP Business One Software can help you monitor active inventory, and implement a more effective inventory management system.


Marshall Walker Lee graduated Summa Cum Laude from the University of Michigan's Honors College with degrees in Writing and Philosophy. As a freelance writer and designer he has developed branding strategies and programming for J. Walter Thompson, Nike, the Kellogg Foundation, Spike TV, Sony Films, and General Motors. He is the co-founder and director of Poor Claudia, a 501(c)3 non-profit publishing enterprise based in Portland, Oregon.