How to manage inventory in a small business without the guesswork.

Inventory management basics for small shops

Inventory management for retail depends on a stock record you can believe. Every method in this guide builds on it, and it needs four things:

• One entry per product, with its own barcode or code, cost price, selling price and unit. Sizes and colours you want to track separately should be separate products.
• Every movement recorded: sales, deliveries, customer returns, breakages, waste and transfers between locations.
• A level per location, if you have a stockroom off site or a second shop.
• Regular checks against the shelf, so small errors are corrected before they spread.

Doing this by hand is where most small shops slip. In POS2026 Inventory Sales, the sale and the stock movement are the same event, so the level is current the moment the customer leaves the counter.

ABC analysis: focus on the lines that matter

In most shops, a small group of products brings in a large share of the takings. ABC analysis finds that group so you can spend your time where it pays. Take your sales by product for the last three to twelve months, sort them from highest sales value to lowest, then add up a running total.

Where you draw the lines is your choice. A common starting point is to call the products that make up the first 80% of sales value class A, the next 15% class B and the rest class C.

• A lines: never let them run out. Count them often, set safety stock, check their prices against competitors and give them the best shelf space.
• B lines: reorder on a regular day with a reorder point, and count them monthly.
• C lines: order small quantities, count them at the full stock take and review them twice a year for deletion.

Tip. Run the ranking on profit as well as sales. A line that sells well on a thin margin may matter less than a slower one that earns more on each sale. The Report module breaks sales down by product, with filters and export, which is all you need for the ranking.

Set reorder points from supplier lead times

A reorder point is the stock level at which you place the next order, so the new delivery lands before the shelf is empty. It depends on two numbers: how fast the line sells and how long the supplier takes to deliver.

• Lead time demand = average daily sales × lead time in days
• Safety stock = (busiest day sales × longest lead time) − lead time demand
• Reorder point = lead time demand + safety stock

Say a hardware store sells an average of 4 boxes of wood screws a day and the supplier usually delivers in 6 days. Lead time demand is 24 boxes. On a busy day it sells 6, and the slowest delivery has taken 8 days, so safety stock is 48 − 24 = 24 boxes. The reorder point is 48 boxes. The reorder point calculator does the same sum for any product.

Use real lead times, not the ones on the supplier's website. Recording each order in Purchase with its delivery status shows how long deliveries actually take. Then enter the reorder point as the low-stock level in Stock, and POS2026 flags the product when it gets there.

FIFO for perishables and dated stock

First in, first out (FIFO) means the oldest stock is sold first. For milk, bread, fresh produce, chilled food and anything with a date, it is the difference between selling stock and throwing it away.

• Put new deliveries behind older stock on the shelf and in the chiller, never in front.
• Where dates vary within a delivery, sell by expiry date rather than arrival date. This is sometimes called first expired, first out.
• Write the delivery date on outer cases in the stockroom so anyone can rotate them.
• Check dates on short-life lines every day and reduce the price before the last day, not on it.
• Order short-life lines little and often, even if the case price is slightly higher.
• Record every item thrown away as a stock adjustment, so waste shows up in your figures instead of hiding in the bin.

Spot and clear dead stock

Dead stock is anything that has stopped selling. Set your own test, such as no sales in 90 days or no sales since last season, and check against it every month using your sales report by product. Lines that sold nothing in the period are your list.

It usually comes from ordering too much of a new line, a minimum order quantity that was bigger than demand, or a trend that moved on. Every pound or dollar in dead stock is money you cannot spend on lines that sell.

• Move it to a better position, near the till or at eye level, and give it a fair second chance.
• Bundle it with a fast seller, or reduce it in steps until it moves.
• Ask the supplier about returns or swaps, especially if you buy from them regularly.
• Write off what will never sell, and stop reordering it.
• For new lines, order a small first quantity and reorder on proven sales.

Use cycle counts between full stock takes

A cycle count is a quick count of a few products, done during the normal week. Count A lines weekly, B lines monthly, and any product the moment its figure looks wrong, such as a product that shows in stock but cannot be found on the shelf. Correct the record straight away and look for the cause while the trail is fresh.

Cycle counts do not replace a full count, but they make it shorter and less of a shock. Our step-by-step guide explains how to do a stock take when the time comes.

Stock management tips that save money

• Organise the stockroom in the same order as the shop floor, so restocking is quick and nothing gets lost at the back.
• Have one person check every delivery against the order before signing for it.
• Record breakages and waste on the day they happen.
• Check supplier prices on every invoice and update your cost prices, or your margins drift without you knowing.
• Do not let a deal or a minimum order push you into buying months of a C line.
• Plan for seasons: order early for Christmas and summer peaks, then scale back before they end.
• If you have two shops, transfer stock between them before reordering. Stock transfers move it without a new purchase.