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Is Your Business Making These Inventory Mistakes?

Updated: Sep 3, 2020

A misplaced item here and there, a forgotten reorder, an accidental overstock — these types of

inventory missteps don’t seem like a big deal in the moment, but they cost small businesses a

lot of money over time.

Despite the high error rates, many small businesses continue to rely on clunky, outdated

inventory management practices. Is your business one of them? To find out, see if you’re

making these common inventory management mistakes. Then, learn how to solve them.

Inventory Management: Where Small Businesses Go Wrong

Their warehouse is a mess

A disorganized warehouse leads to lost inventory, delayed order fulfillment, and higher costs. It

also makes it all but impossible to automate inventory management.

Adequate shelving and a streamlined organizational system are the foundation of an organized

warehouse, but you also need a way to easily track stock. There are a few options for tracking

stock, including RFID chips, but most small businesses opt for barcodes due to the affordability

of a barcode system. By scanning barcodes to track inventory as it enters and exits the

warehouse, businesses can cut the time it takes to pick and count inventory.

They only do physical inventory once a year

Automating inventory reduces errors, but it can’t eliminate them entirely. Shrinkage due to theft,

damage, and human error can still occur in an automated system. If a business performs

frequent inventory counts, it can catch a problem before it grows. If your small business only

counts once or twice a year, however, you won’t notice unusual shrinkage until the damage is


There’s another problem with only counting inventory once a year: It’s a major undertaking.

Businesses that perform annual inventory counts often have to close for one or more days,

losing money in the process.

Instead of putting off inventory counts, break them up into manageable chunks. By performing

cycle counts throughout the year, businesses can track inventory without disrupting regular


They oversell inventory

Overselling stock is a major customer service misstep, but it’s easy to do when you’re selling

across multiple locations or channels. If inventory data doesn’t sync from warehouse to

warehouse or across e-commerce and brick-and-mortar channels, you might sell an item you no

longer have in stock.

Moving inventory management to the cloud solves this problem by letting small businesses sync

inventory data in real-time so they always know what’s in stock and where. Cloud-based

applications like Zoho Inventory and TradeGecko are a good fit for many businesses, but if your

business has specialized inventory needs, consider custom software instead.

They stock too little (or too much) inventory

Overselling isn’t the only way that poor inventory management affects customer satisfaction.

When stock outs cause bare shelves and shipping delays, it drives customers to competitors.

While a lack of inventory can be a major problem, so can too much. Inventory surpluses add

challenges to warehouse organization and increase the risk of damage, depreciation, and

expiration. While there are strategies for liquidating excess inventory, it’s usually at a loss.

The best way to avoid over- and under-stocking your warehouse is to improve inventory

forecasting. Small business owners can perform basic forecasting by reviewing past sales data,

but for more accurate forecasting, invest in inventory management software that uses

algorithms to predict demand. If you’re having difficulty accurately gauging how much inventory

your business needs, you can hire freelancers through an online staffing agency to find a

capable freelance supply chain or e-commerce consultant. You can also engage and network

with many capable professionals looking for employment opportunities through The Tech


Inventory shouldn’t take up a ton of your business’s time, but it also shouldn’t be an

afterthought. That’s why you need an automated inventory management system that allows

your business’s inventory to run smoothly without a ton of time and labor. Instead of putting up

with the frustrations and wasted funds of outdated inventory management practices, make the

leap into a system that’s scaled to your growing business.

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