Inventory management for small shops: a practical guide

What does inventory management mean for a small shop?

Inventory management is knowing what you have, where it is, what it cost and how fast it sells, and acting before a shelf runs empty or money sits in stock nobody wants. A small shop does not need a warehouse team for that, only one record that every piece passes through on its way in and out, and a few routines that keep it honest.

Think of the record as a ledger: every delivery, sale, return, transfer and correction adds a line, and your stock is the sum of the lines. One item's lines make its stock card, which our guide “What is a stock card” explains. If you are still choosing a system, start with our guide “What is a POS system?”.

How should a small shop receive stock?

Most stock errors are made at the back door, not at the till. A delivery booked wrongly is wrong in every report that follows.

• Count the delivery against the delivery note before you sign, size by size and colour by colour.
• Record what arrived, not what you ordered, and note anything short or damaged on the supplier's copy.
• Enter the delivery the same day, with the supplier's invoice number.
• Enter the unit cost from the invoice, including shipping if you pay it, so your margins reflect the real cost.
• Label every piece before it goes on the rail.
• Send faulty goods back as a supplier return, not a quiet write-off, so what you owe the supplier stays right.

How do you price stock so it still makes money?

Start from cost. The label price has to cover what the piece cost, including shipping, then rent, wages and the markdowns you will give later. Many shops set a target margin per category rather than per item, because a T-shirt and a leather jacket do not carry the same mark-up.

When a supplier raises its price, review your selling price at the next delivery, not at the end of the year. Change prices on purpose, note when and why, and reprint the labels at once: a label that disagrees with the till costs you money or trust. Plan markdowns instead of agreeing discounts one by one at the till, and show the old price beside the new one. A branch with higher rent can charge more, as long as its labels match its own till.

How often should a small shop count its stock?

A count is the only way to know your records are true. For most small shops the right rhythm is a short cycle count every week, one area at a time so everything is counted at least once a quarter, plus a full count at the end of each season or year.

Count blind, so the person counting cannot see the quantity the system expects. Recount large or expensive differences before you accept them, then record each correction as an adjustment with a reason. Our guide “How to do a stock count” covers it step by step.

How do you manage stock across branches?

With two or more branches, each needs its own stock figure, and stock moves between them only with a document: the sending branch records what it sent, and the receiving branch counts what arrived. Stock on the road is on neither shelf, so neither branch should sell it or count it.

Settle differences within days, while people still remember: if ten pieces left Cairo and nine reached Giza, find out whether the tenth is still coming, was never sent or was lost. Then move stock to where it sells. A size sitting unsold in one branch may be the size the other keeps running out of, and moving it is usually cheaper than buying more.

How do you plan stock for the seasons?

Clothing and shoe shops live by seasons. Buy each season from what the last one sold: each size's share of sales, the colours that moved and the models that did not. Check sell-through in the middle of the season, while there is still time to move stock or reorder a winner.

At the end of the season, decide the fate of every leftover piece: a markdown, a move to the branch that sells it, a return to the supplier if you agreed one, or carrying it into next season at a lower price. Count before you close the season. Shops without seasons have the same job with slow movers: anything unsold for months is money on a shelf, and it should be priced to go.

When should you reorder, and how much?

For the items you must never run out of, set a reorder point: the stock level at which you order again. A simple rule is average daily sales times the supplier's delivery time in days, plus a few days of safety stock. Set a refill-to level too, so each order is a steady size, not a guess.

Before you order, check what is already on its way, what another branch has spare and what has not sold since the last delivery. The cheapest stock is the stock you did not need to buy.

How do you stop stock going missing?

Stock goes missing in ordinary ways: a delivery booked wrongly, a wrong size scanned, a return put back without a record, breakage nobody wrote off. Theft by staff or customers hides in the same gaps, so the controls that catch mistakes catch theft too, and they protect honest staff. Our guide “How to prevent cashier theft” covers the till side.

• Give every person their own login, so every movement has a name.
• Never let a stock figure be typed over: a correction is an adjustment with a reason, checked by a second person where you can.
• Count blind, and rotate who counts each area.
• Whoever receives a delivery should not be the only one who later counts that stock.
• When an item comes up short, read its stock card before drawing conclusions.

How PointLit handles this

• Receiving: in Goods receipts, pick the supplier, type the invoice number in Reference, add each item's quantity and Unit cost, and press Record the receipt. The item's average cost updates, and Add to Barcode Printer queues a label for every piece received.
• Pricing: Change prices… on the Products screen reprices many variants at once by an amount or a percentage, and can keep the old price as the Was price. Price lists set prices per store, city or country, and the Price changes report shows each Old price, New price and who changed it.
• Counting: in Stock counts, Blind count hides the system quantity, a count can cover one Collection, and Post adjustment writes the differences to the stock ledger.
• Branches: a New transfer leaves with Send now and arrives when the other branch presses Receive on the Inbound tab; short lines stay In transit. The Suggested transfers report shows where one branch has spare stock that another branch lacks.
• Seasons: Collections are Planned, Open or Closed, and Carry over… moves unsold stock into the next season with an optional Markdown %. Collection performance, Size curve, Sell-through and Stock ageing show what sold and what did not.
• Reordering: Reorder points per branch feed the Low stock and Suggested purchases reports, and Suggested purchases lists what To buy, by supplier.
• Losses: ledger lines cannot be edited or deleted, Stock adjustments require a Reason, and the Stock shrinkage report shows what counts found missing, by branch, product or variant.