Best Practices for Inventory Control
The best inventory control practices for small businesses include effectively forecasting demand, tracking inventory, categorizing items, determining reorder points, and sidestepping common mistakes. These strategies help cut costs, keep key items in stock, and improve decision making across all industries.
Whether you operate an online store, a boutique, or a small manufacturing operation, the way you manage inventory can either keep you profitable or hold you back. Well-functioning inventory control keeps the right items in the right place — nothing wasted, nothing missing — while poor management leaves companies stuck with shelves full of the wrong products or scrambling to restock bestsellers.
The good news: Many small businesses don’t need a warehouse team or fancy software to stay ahead. A few consistent habits can make a huge difference.
Below, you’ll find more information on these best practices for inventory control.
Best Practice: Forecast Inventory Demand
While you can’t predict demand perfectly, forecasting inventory is not total guesswork. To predict demand, look at your sales history, and then factor in upcoming events such as holidays, promotions, new products, and even weather.
Use these best practices for inventory forecasting:
- Check Your Past Sales: Your own numbers are the most useful estimator tool. Even one year of data will reveal what products move and when. Use existing data to set a baseline, especially for seasonal demand.
“Historical sales data has never failed us. Look back at what sold well in the same season last year, and factor in any trends you’re seeing now,” says Mike Handelsman, CEO and owner of FoamOrder, a custom foam product company. “We also layer historical sales data with seasonal spikes. Our products see a huge spike in spring, so we start planning in January. Same with supplier lead times — if shipping is slowing down, we’ll adjust the orders.”
- Look Ahead: Local events, product launches, sales, and even a string of sunny weekends can all spike demand. Plan around these events whenever possible.
- Talk to Your Suppliers: If you’re expecting a bump in demand, give your suppliers a heads-up. A strong relationship can mean quicker turnaround times, smaller order minimums, or a bit of flexibility when things change.
- Review and Adjust Often: Forecasting isn’t a “set it and forget it” task. Revisit your assumptions monthly or more frequently if circumstances change.
A study published in 2025 in the Journal of Recent Trends in Computer Science and Engineering found that small retailers using real-time inventory systems reduced overstocking by an average of 15 percent, thanks to improved forecasting and timely data updates.
Examples Across Industries: Every industry has its own standards when it comes to inventory control. For example, a toy store might place larger orders ahead of the holidays, using Q4 sales from the previous year to inform quantity decisions. A café may bump its cold brew order ahead of the first 80-degree weekend. A small manufacturer could time material purchases around production cycles, not guesses. Understanding the swells in demand for your particular industry will help you forecast more accurately.
Forecasting is not about being right. It’s about being ready. You’re aiming for fewer surprises and better decisions, not perfect predictions.
Best Practice: Use an Inventory System That Matches Your Needs
When selecting an inventory management system, bigger and more advanced aren’t necessarily better. Look for a solution that works for your size, team, and products — this could be a simple spreadsheet or cloud-based software. The most important thing is to use it consistently — every time you sell, receive, count, or reorder. Follow these best practices for using an inventory system:
- Start Small if You Need To: If you have fewer than 50 SKUs and a single person managing stock, a spreadsheet might suffice. Keep it clean and update it daily.
- Switch to Software as You Grow: Software tools help sync stock across sales channels and users, and real-time updates cut down on manual errors.
“When you start noticing that keeping track of your inventory in spreadsheets feels like a game of catch-up, it’s time to consider software,” says Wes Wakefield, Founder of Pro Coffee Gear, an online retailer of high-quality brewing accessories. “For example, if you’re spending more time fixing errors than actually managing your stock, it’s a clear sign that a more automated system could help.”
- Pick a System That Integrates With Your Existing Tools: For example, if you’re already using QuickBooks for accounting, it might make sense to use QuickBooks Commerce to manage inventory. At the very least, make sure your tools are compatible.
- Support Your Workflow: Manufacturers or businesses with raw materials need inventory tools that support features such as bills of materials (BOMs), production tracking, or work-in-progress (WIP) visibility.
Examples Across Industries: A boutique retailer might start with Square’s free inventory tracking, then upgrade as they expand to multiple locations, while a DTC ecommerce brand might choose Zoho Inventory for its built-in integrations with online storefronts. A small manufacturer might rely on Smartsheet to customize inventory tracking alongside production schedules and job orders.
The right system should make your work easier, not more complicated. Real-time tracking helps prevent double-selling, missed reorders, and “I thought we had more of those” moments. And if it takes more than a few minutes to train someone new, it’s probably too much system for your team.
Best Practice: Count Inventory Regularly and Accurately
Regular inventory counts help you spot shrinkage, fix data errors, and avoid ordering more of what you already have. Don’t wait until tax season to do a proper count.
Follow these best practices for inventory counting:
- Select a Counting Method That Suits Your Workflow: You don’t need to halt operations and count everything at once. Many businesses use cycle counts, where teams check one category each week or month. Performing counts in small pieces makes it easier to stay on top of things.
“Small businesses should place emphasis on cycle counting rather than rely solely on annual stocktakes — it's akin to monitoring your vital signs daily instead of once a year,” says Peter Muggleton, Managing Director at Frelan Hardware, a UK-based supplier of architectural iron goods.
Andrew Lokenauth, an operations consultant and founder of TheFinanceNewsletter.com, agrees. “The biggest game-changer is doing cycle counts instead of annual counts,” he says. “I had this client in food distribution who was losing $50,000-plus annually from shrinkage until we implemented weekly cycle counts on their top 20 percent of items.”
- Focus on High-Impact Items: Start with your bestsellers, high-value items, or any products prone to theft or spoilage. If you can’t count it all, count what matters most.
- Compare Physical Counts to Your Records: If the numbers don’t match, dig in deeper to identify process gaps or human error. Look for patterns (e.g., items that always come up short or over) so you know where you need to improve.
- Set a Schedule and Stick to It: Inventory control only works when it’s performed consistently. Set a schedule and make it a habit, whether it’s every Friday morning or the first Monday of the month.
Examples Across Industries: Retail shops may conduct a cycle count of a few shelves every week. Restaurants often count key ingredients daily, especially proteins and alcohol. Small manufacturers may focus on components that are difficult to replace or quickly become obsolete.
Best Practice: Categorize Inventory With ABC Analysis
Not all inventory deserves equal attention with tracking. You can use ABC analysis to separate the high-impact products from the bulk fillers. Doing so will help you identify the products that you need to track more frequently and diligently due to high demand.
Here’s how ABC analysis works:
- Rank Your Inventory by Value or Usage: “A” items are your most valuable — for instance, 20 percent of your stock that drives 70–80 percent of revenue. “B” items are in the middle, and “C” items are the cheapest, slowest, or most plentiful.
- Review “A” Items Often: These products require tight control, including frequent counts, accurate reorder points, and consistent monitoring. They’re the most valuable because they drive the majority of your revenue.
- Manage “B” Items With Balance: Don’t overthink these items. Check them regularly, but not obsessively.
- Handle “C” Items in Bulk: These products can often be bought and stored in large quantities with simple tracking. Just make sure they’re not gathering dust.
Examples Across Industries: A local bike shop might categorize electric bikes and high-end gear as “A” items, standard tires and chains as “B” items, and accessories such as reflectors or water bottles as “C” items. A bakery might categorize flour and butter as “A” (used daily and in large quantities), niche flavorings as “B,” and cupcake wrappers as “C.”
Best Practice: Set Reorder Points and Maintain Safety Stock
Running out of stock costs you sales, while overstocking ties up cash. The sweet spot is somewhere in between, and that’s where the reorder point (when to restock) and safety stock (how much stock to keep on hand) come in.
Here are best practices for inventory reordering:
- Figure Out Your Lead Time: How many days does it take from placing an order to having it on the shelf? That’s your starting point.
- Track How Fast the Item Sells: Look at your average daily or weekly usage. Multiply that by the lead time to estimate when to reorder.
- Keep Safety Stock as a Buffer: Shipments get delayed. Keep safety stock on hand in case of unexpected events. As a general rule, hold extra stock equal to a few days’ worth of sales.
- Adjust Your Numbers Over Time: Reorder points shouldn’t stay fixed. Revisit them when demand changes or your supplier’s delivery schedule shifts.
“I swear by the ‘triple lead time’ approach,” Lokenauth says. “Take your supplier's stated lead time, multiply it by three, then add a 20 percent buffer. It may sound excessive, but it works.”
- Strengthen Your Supplier Relationships: A reliable vendor might offer a faster turnaround or smaller minimum orders, or they might even hold inventory for you if they are familiar with your purchasing patterns. Keep them informed about upcoming demand shifts.
Examples Across Industries: A clothing store might set reorder points for its core sizes and colors, with higher safety stock ahead of the holiday rush. A small parts supplier might adjust reorder points based on vendor reliability: tighter for dependable vendors and looser for those that are unreliable.
For more information on inventory systems and how various methods work in practice, refer to this guide on inventory control methods and procedures.
Best Practice: Avoid Common Inventory Control Mistakes
Even businesses with solid systems fall into inventory mistakes: a few missed counts, a little too much ordering without hard numbers, or a bad bulk purchase. These mistakes can quietly snowball into lost sales or tied-up cash. That said, most of these issues are fixable, as long as you catch them early.
Below are some common inventory mistakes:
- Guessing Instead of Checking: Trusting your gut over your records often leads to overstocking or stockouts. If you don’t know how much you have, don’t order. A 2023 study in Applied Sciences found that many small businesses rely too heavily on subjective forecasting and often miss performance targets as a result. The researchers recommended adopting data-driven forecasting tools to improve both accuracy and efficiency.
- Skipping Counts: A habit of skipping weekly checks can turn into missing an entire quarter. Every skipped audit pushes your numbers further from reality, so stay on top of your scheduled counts.
- Treating Every Product Equally: Some items deserve more attention than others. If you’re overcounting low-value products and undercounting top sellers, you’re wasting your time.
“A common mistake is not tracking slow-moving inventory,” says Wakefield of Pro Coffee Gear. “In our early days, we overestimated the demand for a certain accessory, and as a result, we had it sitting in the warehouse for months.”
- Not Training Your Team: It only takes one person skipping the system to throw off your entire inventory system. Everyone who touches stock needs to know the rules.
- Holding On to Slow Sellers: Inventory that doesn’t move ties up space and cash.
“Most small businesses hoard low-turn stock like it is treasure,” says Rick Newman, CEO of UCON Exhibitions, which manufactures custom exhibition stands in Australia. “That burns space, ties up cash, and makes picking a nightmare.”
- Ignoring the True Cost of Inventory: A product that is cheap to buy in bulk might still be expensive to store.
“Not accounting for holding costs drives me nuts,” says Lokenauth. “Every month I see businesses ordering huge quantities for minimal discounts while ignoring storage costs and depreciation.”
Examples Across Industries: A retail shop might reorder based on shelf space instead of actual counts, until they realize they’ve been sitting on stock that doesn’t move. A café could lose track of espresso beans because no one logs deliveries. A distributor might forget to update safety stock levels as sales increase and run dry in their busiest month.
Best Practices: Monitor the Right Inventory Metrics
You can’t manage what you don’t measure. Watching a few key inventory numbers can help you catch issues early, improve decisions, and explain what’s happening behind the scenes. You don’t need dozens of reports, just the right ones.
Here are the best inventory metrics to track:
- Inventory Turnover Ratio: This indicates how frequently you sell through your stock within a given period. A low number usually means overstocking or slow-moving products. Learn how to calculate inventory turnover.
- Days of Inventory on Hand: How long will your current stock last if nothing else comes in? This helps with cash flow planning and reorder timing.
- Stockout Rate: How often are you out of what people want to buy? If it’s happening regularly, your forecasting or reorder points might be off.
- Shrinkage: This metric tracks loss from theft, damage, or mistakes. If it’s climbing, you have a process or personnel problem.
- Dead Stock: If an item hasn’t moved in 60–90 days, consider it dead stock. Then, consider discounting it, bundling it with faster sellers, or removing it from your active catalog. Stale inventory ties up cash and shelf space.
Examples Across Industries: A gift shop might track turnover to avoid being stuck with seasonal items. A small manufacturer might focus on maintaining a sufficient number of days of inventory on hand to keep materials flowing without clogging up the floor. A grocery store might monitor shrinkage on perishables weekly to keep waste under control.
Inventory Control Tips by Industry
While most inventory best practices apply across industries, some tactics matter more, depending on what you sell and how you operate. Here’s a quick look at which strategies tend to matter most for different types of small businesses.
| Practice | Retail | E-commerce | Manufacturing | Food Service |
|---|---|---|---|---|
| Forecast Inventory Demand | Use past seasonal sales and promotions | Factor in shipping timelines, ad spikes | Plan around production cycles, vendor lead times | Base demand off menu cycles and customer traffic |
| Choose the Right System | Start with POS-based tools | Use tools that sync across sales platforms | Choose systems that support BOMs and WIP | Use a system that tracks perishables and usage |
| Count Inventory Regularly | Cycle-count by shelf or category weekly | Focus on top-selling SKUs and returns | Audit critical raw materials and components | Count key ingredients daily or weekly |
| Categorize Inventory (ABC Analysis) | Track high-value items more often | Focus on the top-margin or fast-moving SKUs | Flag costly or hard-to-replace parts | Apply to high-cost staples such as proteins, oils |
| Set Reorder Points and Safety Stock | Use sales velocity and vendor lead time | Build in shipping delay buffer; automate reorders | Tie reorder points to job timing and material use | Use par levels and lead time for core ingredients |
| Avoid Common Mistakes | Ordering by feel, not data; skipped counts | Overselling across channels; late updates | Poor process handoff between production and stock | No logging of waste, spoilage, or deliveries |
| Train Your Team | Ensure POS entries and stock updates match | Standardize how orders and returns are tracked | Train operators on receiving and BOM updates | Train all staff to track usage and log waste |
Best Practices for Using Inventory Control Software
The best inventory software for small businesses is the one you’ll actually use. Look for tools that match your size, sales model, and growth plans. Cloud-based platforms make it easier to update stock in real time, track orders, automate alerts, and reduce manual mistakes.
Inventory software isn’t just for big companies anymore. These tools are more affordable and user-friendly than they used to be, and they can save hours of rework every week. If your static spreadsheet is starting to break down or you're getting too many “I thought we had that in stock” moments, it’s time to upgrade. Below, we outline how to select the right platform, set it up correctly, and optimize its value.
Best Practice: Choose Inventory Software That Fits Your Business Model
Not all inventory tools are built the same. Some are perfect for brick-and-mortar shops, while others are better for online sellers or manufacturers. You don’t need the most advanced system, just one that works for what you do and will scale as you grow.
Here are the best practices for choosing inventory software:
- Ensure the Software Matches Your Sales Approach: Whether you operate a storefront, an online shop, or both, your inventory software should sync across channels and update automatically as stock moves in or out.
- Match the Software to Your inventory Needs: If you manage a lot of SKUs, product variations, or raw materials, look for features such as batch tracking or support for BOMs. Don’t assume basic tools will scale with complexity.
- Know When It's Time to Upgrade: If you’re constantly correcting spreadsheet errors, struggling to share files, or lacking visibility as orders increase, it’s time to upgrade. Growing SKU counts and staff size often signal the need for real-time tools with built-in checks and tracking.
“From my consulting work, the tipping point comes around $500,000 in inventory or when you're managing 200+ SKUs,” Lokenauth says. “I've seen too many businesses wait too long — one manufacturing client wasted 15 hours weekly on manual inventory updates before we stepped in.”
Newman offers this advice: “Forget spreadsheets the moment your SKUs cross 50 or your monthly stock value clears $10,000. At that point, there’s too much room for version control chaos. Move to software when you spend more time double-checking numbers than making decisions.”
- Avoid Overbuilt Systems: Don’t pay for features you won’t use. Focus on solving your current problems — such as tracking inventory movement or generating reorder alerts — and expand capabilities only when needed.
You’re not buying software — you’re buying time, visibility, and fewer headaches. Choose something you’ll stick with. If you’re just starting to explore cloud-based tools, this beginner-friendly guide to inventory management covers the basics of getting set up. If you’re looking for a simple tracking template, explore our collection of free Excel inventory templates, including ones tailored for restaurants, bars, and clothing retailers.
Examples Across Industries: A retail store might start with Square’s free inventory tools and scale up only when it opens a second location. A DTC ecommerce brand might choose Zoho Inventory for its integrations and order automation. A small machine shop might need Smartsheet or a custom tool that connects inventory with production schedules and bills of materials.
Best Practice: Integrate Systems for Seamless Workflows
Inventory software works best when it works with the rest of your tools. If your sales, purchasing, and accounting systems are all siloed, you’ll spend hours copying data — or worse, making decisions based on out-of-date numbers. Integration saves time and cuts down on errors.
- Connect Your Sales and Inventory Tools: Your system should automatically update stock levels as sales occur — whether in person or online. Manual syncing is error-prone and time-consuming.
- Link Purchasing and Receiving: When you place or receive an order, your inventory records should update instantly. This saves you from double entry and miscounts.
- Sync Accounting Data: Your inventory values and cost of goods sold (COGS) should flow directly into your accounting system. That keeps your financial models accurate without extra work.
- Automate Routine Tasks: Set up automatic reorder triggers, low-stock alerts, or reminders for inventory checks. These features save time and reduce surprises.
- Track User Activity: When software logs who made each change, you gain visibility and accountability. If stock goes missing or data is off, you’ll know who last touched it — and can fix gaps faster.
“Whatever tool you pick, make sure it tracks movement by user, not just item,” Newman says. “Accountability builds consistency.”
Examples Across Industries: A food business might link daily sales to inventory dashboards, while a small manufacturer could sync purchasing and job tracking to avoid delays. Every manual update is a risk for error — integration helps you avoid them.
Best Practice: Automate Low-Stock Alerts and Reports
You shouldn’t have to check every shelf to know when to reorder. Inventory software can alert you when stock runs low, generate reorder reports automatically, and even trigger a purchase order. Set it up once, and it works in the background.
Best practices for inventory automation include the following:
- Use Low-Stock Alerts: Most systems allow you to define a minimum quantity for each item. When the stock drops below that number, you receive a notification via email, dashboard, or mobile alert.
“Even if you start with something very simple, you’re already doing better,” says Handelsman of FoamOrder. “Something that connects directly to online stores and marketplaces, tracks stock automatically, and sends alerts when items run low.”
- Create Recurring Reports: Set up weekly or monthly reports that show which items are running low, what’s overstocked, or what hasn’t moved in weeks. These numbers help you spot patterns and plan.
- Auto-Generate Purchase Orders: Some tools allow you to link alerts directly to vendors. When an item reaches the reorder point, the system generates a purchase order (PO) that is ready for review and approval.
- Send Reminders to Team Members: Assign stock responsibilities and automate reminders so nothing gets missed. This includes cycle counts, vendor follow-ups, or inventory cleanups.
Examples Across Industries: A boutique might set alerts for core sizes and colors to prevent stockouts on bestsellers. A small restaurant could automate reorders of staples, such as flour or coffee beans, once they dip below a certain threshold. A home goods retailer might receive a weekly digest showing inventory that hasn’t moved in 60 days.
Best Practice: Customize Inventory Dashboards and Templates
Inventory software isn’t just about tracking numbers. It’s about being able to quickly identify the numbers that matter. A clean dashboard or a well-built template can help you spot trends, flag issues, and make better decisions without digging through spreadsheets.
Here are best practices for inventory control dashboards:
- Build a Dashboard That Reflects Your Goals: Track what matters most to your business, such as low-stock items, high-turnover products, aging inventory, or reorder status. Customize the view to make your top concerns front and center.
- Use Templates to Simplify Workflows: Smartsheet and similar tools offer inventory templates that you can adapt to your needs. Track stock levels, vendors, reorder points, and cost all in one place.
- Summarize Data Visually: Charts and graphs can highlight patterns that rows of numbers won’t. A visual summary of inventory value, stock movement, or daily usage helps you take action more quickly.
- Share Views With Your Team: A shared dashboard ensures that everyone is viewing the same numbers. That means fewer miscommunications and greater accountability.
Examples Across industries: A small warehouse team might use a Smartsheet dashboard that displays live stock levels and flags any items below the reorder point. A bakery might create a custom daily inventory log that feeds into a summary chart, showing usage versus waste. A retail store can track the monthly inventory value by category to inform buying decisions.
Best Practice: Keep Data Accurate and Train Your Team
Even the best software falls apart if no one uses it correctly. Inventory systems depend on good habits and consistent data entry. That means training your team on the new system and giving them the tools to succeed.
The best practices for inventory data and training include the following:
- Standardize Data Entry: Use the same naming conventions, units of measure, and categories across the board. Clean data makes reporting easier and helps you avoid mix-ups.
- Limit Edit Access: Most systems let you set permissions. Grant editing access only to those who require it, and give viewing or commenting permissions to others.
- Audit for Accuracy: Perform spot checks regularly. Compare what’s in the system to what’s on the shelf. When there’s a mismatch, fix the record and find the root cause.
- Train Your Team and Keep It Simple: Take the time to formally onboard your team to the new program. Show them exactly how to receive inventory, update counts, or log usage. Document the process.
“Training is useless if the process is a guessing game,” Newman says. “Standardize tasks to the minute and stage them visually. New staff should scan, log, and shelve in under three minutes per item. Use a laminated checklist, one crate, and a timer. Repetition plus visual feedback locks habits in 50 percent faster than documentation alone.”
Lokenauth offers this visual training technique: “The most effective approach I’ve seen is creating video SOPs. At my client’s warehouse, we recorded actual employees doing cycle counts and receiving orders. We made five-minute videos showing common mistakes and proper techniques. Engagement shot up 90 percent compared to their old written manual.”
Examples Across Industries: A small retailer might train weekend staff to log every sale in the POS system to keep inventory accurate. A food truck owner could create a quick-reference guide for adding deliveries and adjusting counts in their Smartsheet template. A parts distributor might restrict editing access to one trained manager to avoid accidental errors.
Using Smartsheet Templates for Inventory Control
Spreadsheet templates help small businesses track inventory without having to build systems from scratch. Smartsheet offers free, customizable templates, allowing users to monitor stock levels, reorder points, vendors, and more — all in a format that’s easy to update and share.
Smartsheet’s inventory stock control template lets you track product names, SKUs, quantities on hand, reorder points, preferred suppliers, and unit costs all in one view. You can customize it for your industry, share it with team members, and set up notifications or reminders when your stock levels get low.
Open the template, plug in your inventory, and take the first step toward a simpler, more reliable system.
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