The Retailer’s Inventory Management Guide: How To Use Your POS To Maximize Success
No one ever said that starting a business would be easy. It’s not. If you want to succeed in the incredibly competitive world of retail business, having a working knowledge of point of sale technology (POS) is essential. That’s especially true when it comes to the tools you need to manage your inventory.
Managing your merchandise requires so much more than simply knowing how many items you have at any one time. In fact, the difference between a good system for retail inventory control and a poor one (or none at all) can be the difference between turning a healthy profit or ending up in the red. This article will give you some simple advice on what to look for in a retail management system and how you can utilize one to help your business.
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What Is Retail Inventory Management?
Retailing inventory management is a way for you to organize your products, from keeping tabs on your item counts, to managing purchase orders, to tracking the cost-effectiveness of what you sell.
The Importance Of Inventory Management
If you’re a small business owner, it’s a given that you’re incredibly busy. The 40-hour workweek likely doesn’t exist for you. Every minute is precious, and if you’re finding yourself getting bogged down in managing your inventory for a retail store, it could be taking you away from other crucial functions. Having a professional inventory management system can take much of that off of your plate. The right software can make sure that you always have an up-to-date count of your stock on hand and even place orders automatically, making the tedious process of auditing your inventory a much simpler task.
It can also help you track what products are performing well and which ones may be a drag on your profit margins. Having access to this kind of information can help you diagnose trends and consumer spending habits that you may have otherwise missed. If you’re operating a business that has multiple locations or a warehouse for storing and shipping items, inventory management software becomes practically essential.
Simplify Retailer Inventory Management With A Point Of Sale System
If you have a small to mid-sized retail business, the chances are good that you’re already using a point of sale system. If not, this may be a good way to simplify multiple aspects of your business in one shot. Many POS systems come with built-in payment processing, reporting, and integrations, along with at least basic inventory management, all for a monthly software fee. Cloud-based systems also come with minimal upfront hardware costs, running on iPad or Android tablets.
Almost any point of sale system you pay for will come with at least some form of retailer inventory management. This might be enough for smaller businesses, as this will generally include the ability to input inventory, along with some basic tracking tools and potentially even purchase orders. If you need to get deeper into inventory management tools, many POS systems have an option to upgrade to a more advanced tier, featuring in-depth inventory reports and an unlimited number of items. They may also integrate with inventory management software or offer it as an add-on for an additional monthly fee.
The nice thing about using retailer inventory management that is built into your point of sale system is that it syncs up seamlessly with the software and any other programs you may utilize (such as accounting or delivery apps). If you’re using a POS already, chances are good you have at least some inventory tools already at your disposal.
8 Features Your POS System (Probably) Has That You Should Take Advantage Of
The inventory management tools in your POS system are designed to help when it comes to how to manage your inventory. The following features should help you efficiently manage your merchandise/materials, reduce overall waste, and save money over time. Use them!
- Record Keeping: Any good POS system will allow you to keep track of each item’s quantities. When you know exactly what you have (and where you have it), it’s easier to make informed purchasing decisions. Waste not, want not!
- Multilocation Management: This is an important feature for any business owner with multiple store locations (either retail or restaurant). If your POS allows for multilocation management, you should be able to view details about store inventory at individual locations and get a bird’s eye view of the total combined available stock at every location. Another useful feature is the ability to transfer inventory between locations easily. When transferring inventory, your POS will maintain an accurate record of inventory quantity and location.
- Low-Inventory Tracking: Low-inventory alerts are some of the most important features a POS inventory management system can provide. The complexity of low-inventory tracking tools varies somewhat from software to software. Some programs simply alert you when inventory levels fall off to a specific level (usually set by you). More advanced systems will automatically reorder for you when your stock decreases to a certain preset point. If you are concerned about over-ordering, a few POS software solutions even allow you to set a maximum order point at which no further orders will be made.
- Search Functionality: The ability to search for your products is an integral part of managing inventory (this applies to both retail and restaurant businesses). You’ll want an inventory system that provides for smooth and easy product searching. This is done by assigning categories or tags to products. A good search function will find the product you are looking for based on item tags (size, color, etc.).
- Location-Specific Price Modification: In today’s global world, it is helpful to have a POS system that automatically adjusts prices (and taxes) according to location. (Location-specific price modifications will likely be more valuable for retail businesses.)
- Raw Ingredient Tracking: Raw ingredient tracking is one of the most important features a restaurant POS can have. Because food service businesses work with “raw” ingredients that are eventually assembled into a final product, it can be extremely useful to have an inventory system that keeps track of both raw ingredients and complete products. That way, you can get an accurate idea of where you need to be ordering more and where you’re wasting product. For a more detailed description of what raw ingredient tracking can bring to the table, read POS 101: Raw Ingredient Tracking.
- Inventory Reports: The depth of reports that a POS inventory management system offers will vary, but some of the basics that you should look for include inventory on hand along with low stock reports. Many systems will also have a function you can set up that will automatically re-order certain products when stock is low. You should also look for reports that display how well a particular item is selling and sales reports that can analyze product trends and customer spending trends.
- SKU Management: This goes along with a good search interface, but inventory management in retail stores should have a simple way to organize your stock keeping units, allowing you to sort your products and easily access information about them.
5 Retail Inventory Management Best Practices
Just because you have inventory management software doesn’t mean that you’re necessarily utilizing everything that it has to offer. Here are a few basic but useful tips to keep in mind regarding retail inventory management best practices.
- Audit Your Inventory: It may seem like a drag, and you might think you have a handle on exactly what your business has in stock. However, it’s always wise to set aside time periodically to do a full inventory audit and double-check that you have the items your software claims you have to prevent things such as fraud or even simple accounting errors.
- Prioritize Best Sellers: In the retail industry, the 80/20 rule in retail is broad but can be a good jumping-off point. It states that you should (very roughly) be making 80% of your profits from 20% of your products. Basically, you should figure out what your top-selling items are (something our inventory management system can help with) and make sure that they are getting preferential treatment in all facets of your business, whether its how they are displayed in-store or on the web or when it comes to ordering and marketing. Retail inventory management software can easily help you analyze your top sellers and can help discover buying trends at your business throughout the year.
- Analyze Suppliers: It’s not just your own shop inventory that should be looked at carefully. You should also periodically analyze your supply chain to make sure that you’re getting the best prices available and that there are no inefficiencies in the process of ordering your products and receiving them. Once you’ve established if there are issues among certain suppliers, whether it’s with late deliveries or discrepancies in the orders, don’t be afraid to cut ties or make changes.
- First In First Out: This is another standard industry line, but it’s a good thing to keep in mind. As a rule of thumb, you should be trying to sell the products you have had in your inventory the longest to make sure they aren’t languishing. While this is important in the restaurant industry, where products have expiration dates, it’s also applicable to the retail market, as market and spending trends can shift dramatically and quickly. Again, your POS inventory software can track how long all of your inventory has been on hand.
- Make Sure Your Inventory Management Plays Well With Others: You may have inventory software with all of the features you need, but if it doesn’t sync up with your other software or hardware, you’re going to have problems. This is where utilizing a point of sale system with built-in inventory management can be a big bonus. The software will work with your POS and other products you might utilize (such as your eCommerce platform).
Are Your Retail Inventories Out Of Control? Know When To Call In The Heavy Hitters
By now, you’re probably well aware that not all retail inventory management systems are built the same. Some come with just the nuts and bolts: the ability to import products, item counts, tracking, etc. However, if your business is expanding or has a wide variety of complex products, you may find that basic functionality just isn’t cutting it for your retail inventories. In this instance, you’ll likely need to either upgrade your current inventory software (potentially by upping the tier subscription of your POS service) or purchasing advanced inventory either as an add-on or as a separate product. It can be difficult to know just when you’ve outgrown your basic inventory. If you have multiple stores, particularly where you will be transferring inventory from one location to another, you’ll almost definitely benefit from more robust features. Instead of spending hours of your week organizing or analyzing your inventory, it’s probably worth a little extra money a month to get those hours back. Here are a few features that you can expect out of more advanced retail inventory management software:
- Purchase Ordering: If you’re lucky, this may come with some basic inventory, but it’s an essential feature for most small businesses. This simplifies the process of sending and receiving orders and allows you to store supplier information in your system.
- Transfer Orders: A lifesaver if your business operates across multiple locations. You can see stock information across your locations and receive downloadable reports.
- Stock Adjustments: Modify stock and list a reason for the change. You can see the adjustments automatically and see the adjustments in a report.
- Inventory History: Go back to view all changes throughout your inventory’s history, filtering by each product or employee to track things such as sales and refunds.
- Label Printing: This is always a nice bonus, allowing you to print the SKU, price, and barcode and also help with your business’s marketing.
It’s Time To Invest In Retail Inventory Management — And A POS System
Like anything else in business, becoming knowledgeable in inventory management takes time and comes with experience. Even as an inexperienced business owner, however, you can make smart, practical decisions about which inventory management features are important to you. When deciding on a POS, think about how large your inventory is likely to be and how often you will have to replenish it. Having a POS that helps you eliminate waste and maintain steady levels of retail stock management will go a long way toward your business’s solvency and eventual success. To get started, take a look at some of our inventory management software reviews!