Good inventory management means always having what customers want, without tying up your cash in stock that sits on shelves. Too little and you lose sales. Too much and you lose cash.
Track three things
- What you have: current stock for each product.
- What you sell: how many of each product per week or month.
- How long new stock takes to arrive from your supplier.
With these three numbers, most inventory decisions become simple.
Set a reorder point for each product
The reorder point is the stock level at which you order more.
Reorder point = (average daily sales × days for stock to arrive) + safety stock
Example. You sell 4 candles a day. New stock takes 10 days to arrive. You keep 20 extra as a safety buffer.
- Reorder point: (4 × 10) + 20 = 60 candles.
When stock drops to 60, you order. By the time the new stock arrives, you should be close to your safety buffer, not out of stock.
A simple spreadsheet
For each product, one row with:
- Product name and code.
- Current stock.
- Average sales per week.
- Supplier and delivery time.
- Reorder point.
- A column that flags "order now" when stock is at or below the reorder point.
Update stock each time you sell or receive goods, or use a shop or point-of-sale system that does it for you.
Know your best and worst sellers
Many shops find that a small share of products brings in most of the sales. Keep those well stocked and check them often. Products that rarely sell tie up cash: discount them, bundle them or stop ordering them.
Count regularly
Your records drift from reality through mistakes, damage and losses. Do a full count once or twice a year, and check your best sellers monthly. Fix the records when they differ.
Common mistakes
- Ordering by feel instead of by sales numbers.
- Buying big to get a discount, then sitting on stock for months.
- No safety stock, so one late delivery means empty shelves.
- Not tracking returns and damage.
Inventory and cash
Stock on a shelf is cash you cannot use. Keeping inventory lean is one of the most direct ways to improve cash flow. Check what each product earns with profit margin before you decide how much to keep.