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Inventory Management Basics for Small Businesses

A practical way to track stock, prevent shortages and avoid tying up cash in products that do not sell.

Inventory management means knowing what you have, where it is and when to reorder it. It connects purchasing with sales and cash flow. A small shop does not need a complicated system to begin; it needs one dependable record that changes when stock arrives, sells, is returned or is written off.

Start with a useful product record

Give each item a distinct name or SKU, unit of measure, purchase cost and current quantity. Record variants separately when size or colour changes what can be sold. Count physical stock regularly and investigate differences instead of silently changing the number.

Know when to reorder

A basic reorder point is expected sales during supplier lead time plus a safety buffer. If you sell five units a week, delivery takes two weeks and you keep four units as a buffer, reorder at 14 units. Revisit the threshold when demand or delivery times change. Perishable or seasonal products need smaller, more frequent orders.

Watch the cost of holding stock

Excess inventory uses cash and space. Compare fast-moving, slow-moving and unsold items before buying more. Check gross margin alongside stock turnover: a product can look profitable per sale while sitting on a shelf for months. A connected sales record makes these checks easier, but accurate counting remains essential.