As an inventory software company, we often get asked the question “when should I start tracking my inventory?”. And as a business owner, it may feel hard to determine the answer. This is especially true if you don’t feel like your business is actually a business yet. The answer, however, is fairly straightforward; you should start tracking your inventory from the very beginning.
That’s right, you read that correctly! You will want to start tracking your inventory before you even have your first completed product. Before you can understand why it’s important to track your inventory from the very beginning, it’s necessary to recognize what exactly inventory tracking entails.
When put simply, inventory tracking is having an organized list of the quantity of each material that goes into the fabrication of those products. This is often referred to keeping track of your SKU, or Stock Keeping Unit when referencing a completed product. Your SKU, more specially, is the code or number you use to reference your individual completed stock items. Note that SKUs are completely up to you and how you’d like to reference an item.
Inventory tracking allows you to know your exact stock levels in real time. Which enables you to run your business more smoothly and acquire less hiccups. It is absolutely necessary if you want to run your business sufficiently and obtain the happiness of your customers. Although, it may not feel like it at first, inventory tracking is a major stress relief. If you manage your inventory regularly, you’ll rarely run into problems that relate to not having enough material or supplies. You will also know when your finalized products are running low.
Inventory management should be a key component to your business for several reasons. The most important reasons being the following… Accurately tracking the supply & demand of your products, prioritizing your inventory, keeping your finances in control, and customer relations.
This should be a no brainer. Inventory management will allow you to better track which of your products are flying off the shelves and which products are sitting. Later down the road, this can also help you with product pricing, which you can learn more about here.
Inventory tracking will allow you to clearly see which products are selling (your supply and demand). In order to accurately make use of your marketing tactics, it will be important to know which of your products are most popular. Based on this information you can change your marketing strategy to reflect your best selling items. Inventora allows you to clearly track this information.
If you are an Inventora user, logging your inventory will assist with staying up to date with all your inflow and outflow of money. Inventora breaks down all of your business’s material expenses and sales. This is especially true if you choose to sync your shop with us (i.e. through Shopify, Etsy, Wix, or SquareSpace). Additionally, this will make bookkeeping a breeze for you, therefore also making your business taxes less of a headache.
If you’re not tracking your inventory for your own business organization, you should consider tracking your inventory for customer satisfaction. Accurately tracking your inventory allows you to let your customers know production updates, such as when items are pre-orders, backorders, out of stock items. Not having this information accessible as a customer can be extremely frustrating, often leading in loss of business.
To learn more information about the best practices for inventory tracking, click here.
It’s great practice to track raw materials when you’re in the very early stages of business. This is specifically true for supply orders, but not true for finished products at this time. In the introduction and testing period, it’s best to manually deduct materials as you use them. This is because you’re still trying to see which products will have a permanent place on your shelves in comparison to the products you decide to not keep as part of your inventory.
You can always make test products to see the COGS (Cost of Good Sold), but keep the stock levels set at zero temporarily. Once you get your formulas dialed in, you should then setup the real products and start running production runs. You can easily get started with this today with Inventora!