News  24 August 2021

7 top tips for better inventory management

Taking a systematic approach to inventory management is the best way to ensure accuracy, reduce costs, boost profits and improve customer satisfaction. But how can SMEs reach maximum stock efficiency with limited resources?

inventory management

For growing SMEs, inventory is constantly changing. Raw materials or finished goods arrive, and this stock is then sold or components are used for production. There could also be item returns, incorrect orders delivered and product damage which impacts inventory levels.

There are a lot of moving parts, both incoming and outgoing, which need to be controlled, and that’s where inventory management comes in.

What is inventory management?

Inventory management governs the entire flow of goods from purchasing through to sale. It allows you to track and control all your business inventory as it’s bought, manufactured, stored and sold.

Why is it important?

Whether you’re an independent retailer, an expanding manufacturer or an international distributor, every company needs to take control of inventory to ensure they deliver products on time, meet demand, and keep costs to a minimum.

Effective inventory management allows you to accurately control your stock levels which is essential to ensure orders are fulfilled correctly and that resources are used efficiently. Failing to match demand to stock levels can lead to lost sales, too much cash tied up in excess inventory and damaged customer relationships if orders can’t be achieved.

How can SMEs reach maximum stock efficiency?

As your business scales, managing inventory gets harder. Taking a systematic approach to inventory management is the best way to ensure accuracy, reduce costs, boost profits and improve customer satisfaction.

1. Focus on optimal stock levels

Overstocking and understocking can be significant issues for businesses. Stocking items ‘just in case’ seems like a sensible idea to accommodate sudden changes in demand but it isn’t the most efficient choice. Holding excess stock means you’re wasting warehousing space that could be used for higher-demand items, and you also run the risk of dead stock; inventory that you can’t sell, maybe it’s perishable, or consumer demands change.

In contrast, understocking can also cause issues when customer demands can’t be met. No business wants to miss out on sales because of something that could have been prevented with effective inventory management.

2. Concentrate on your best-sellers

The 80/20 suggests companies earn 80% of their profits from 20% of their products. By identifying your top performers and prioritising these, you will better align stock with customer demand and ensure you never run out of any high-margin products.

This method allows you to rationalise your total inventory and wind down lines that don’t generate sales or healthy profits.

3. Automation is key

Once you have determined the optimal stock levels and which items are most profitable, you can free up a lot of time by automating replenishment. Using an advanced inventory management system, you can specify reorder points and items will automatically be restocked when required.

4. Record stock accurately and consistently

Is your inventory data accurate? It’s not uncommon for SMEs to rely on manual stock counts but this method is not only disruptive and time-consuming, but it is also more prone to human error. Putting a system in place that doesn’t require stocktakes, e.g. using barcode scanners, and implementing consistent processes for staff, is imperative to ensure everything is recorded in the same way and that figures are accurate.

If you manage items that can spoil such as ingredients, food products, chemicals, pharmaceutical inventory, or other items with a dated shelf life, accurate product records can help you keep track of expiration dates to avoid spoilage.

5. Regularly review stock performance

Real-time business intelligence and data is critically important to successful inventory management. Accurate reports allow you to forecast demand and adjust inventory levels to account for seasonal trends, helping you avoid over or understocking and consequently satisfy customer demands.

You also need to review your automatic reorder points regularly to ensure you continue to focus on the best performing products. As the market changes or your marketing and sales teams adjust their activities, different product lines may become more profitable.

6. Build relationships with suppliers

In any stock-based business, supplier relationships are an essential component of effective inventory management. Building strong relationships with key suppliers will help you secure reliable supply, unlock competitive pricing and to understand emerging trends that may impact your business.

It’s also important to evaluate supplier performance as an unreliable supplier that’s often late with deliveries or frequently shorts an order can cause problems for your inventory.

7. Use technology that integrates well

While it’s possible to manage your stock manually using spreadsheets (depending on how much stock you have!) this is not a scalable model. If you have clear growth ambitions, it makes sense to use an inventory management system that can not only grow with your business but integrate easily with barcode scanners, POS systems and eCommerce. Even if you don’t need all these features right away, you can add functionality as your business expands.

As well as connected systems, an advanced inventory management system will connect all of your departments, from sales to customer services, despatch to financials, providing everyone access to up-to-date inventory data and reporting.

Ineffective or manual inventory management can be a huge barrier to growth. Advanced stock management software makes the process of managing your inventory a whole lot easier, saving you time and money while also avoiding the risk of human error by automating key business processes.

With Sage 200, you get a complete inventory and warehouse management solution to help you optimise stock levels, keep costs down and deliver what your customers want.

Share this article  


Prosy Computing Ltd. has been acquired by Pinnacle. For any queries, please email

To read the press release in full please follow this link