One of the biggest challenges that SMEs face is managing and controlling their inventory. Often, small businesses have no system in place and rely on memory to determine what should be on the shelf and when to order new or additional stock. 

Alternatively, they may use a very manual, labor-intensive system. In this comprehensive guide, we will explore why a company should have an inventory system, the benefits it offers, and a comparison of popular inventory management solutions. 

By the end of this article, you will understand the critical importance of inventory systems for small business success.

What is an Inventory System?

Identifying Inventory System

An inventory system is a tool used to track the quantity, location, and status of products or materials a business holds. This system can be manual, using spreadsheets or paper records, or automated, employing specialised software like QuickBooks, Sage, or dedicated inventory management solutions.

Types of Inventory Systems

Invoicing

Inventory systems can be broadly classified into two types:

Periodic Inventory System:

Inventory levels are updated at specific intervals (monthly, quarterly, annually).

Suitable for small businesses with low inventory turnover.

Perpetual Inventory System:

Continuously updates inventory records with each transaction.

Ideal for businesses with high inventory turnover and complex operations.

Benefits of Having an Inventory System

Inventory system details

Optimisation of Resources

Inventory systems help in maintaining optimal levels of stock. By tracking inventory levels and demand patterns, companies can avoid stockouts (running out of products) or overstock situations (holding excess inventory), thereby utilizing their resources efficiently.

Cost Management

Effective inventory management helps in minimizing holding costs (costs associated with storing inventory), stockout costs (costs incurred due to not having enough inventory), and obsolescence costs (costs related to holding obsolete or expired inventory). This contributes to overall cost reduction and improves profitability.

Customer Satisfaction

Having the right products available when customers need them enhances customer satisfaction. Inventory systems ensure that businesses can meet customer demand promptly, leading to better customer retention and loyalty.

Demand Forecasting and Planning

Inventory systems provide valuable data for demand forecasting and planning. By analyzing historical sales data and inventory levels, companies can make informed decisions about future inventory needs, production schedules, and purchasing strategies.

Streamlined Operations

A well-implemented inventory system streamlines various operational processes such as ordering, receiving, picking, packing, and shipping. This leads to improved efficiency, reduced errors, and smoother workflows throughout the supply chain.

Financial Reporting and Analysis

Inventory management systems generate reports that provide insights into inventory turnover rates, carrying costs, and inventory valuation. These reports are essential for financial reporting, budgeting, and strategic decision-making.

Compliance and Regulatory Requirements

Certain industries have regulations governing inventory management practices, such as those related to product safety, quality control, and traceability. Implementing an inventory system helps companies adhere to these regulations and maintain compliance.

Risk Mitigation

Inventory systems enable companies to identify and mitigate risks associated with inventory management, such as stockouts, overstocking, theft, and spoilage. By having real-time visibility into inventory levels and movements, businesses can proactively address potential risks and minimize their impact.

The Pros and Cons of QuickBooks Inventory System

Looking at QuickBooks Inventory System

QuickBooks offers inventory management capabilities within its accounting software, and while it has several advantages, there are also some limitations to consider:

Pros:

Cons:

In summary, QuickBooks inventory system offers several benefits, including integration with accounting features, user-friendly interface, affordability, inventory tracking, and customisable reporting.

However, it also has limitations in terms of scalability, advanced features, batch tracking, manufacturing support, and dependency on internet connectivity. Businesses should evaluate their inventory management needs carefully to determine if QuickBooks is the right solution for them or if they require a more specialized inventory management software. 

It must be noted that QuickBooks do have alternative inventory systems within their approved apps which may give additional features to meet your needs.

Please see our blog on the pros and cons of Quickbooks for small businesses.

The Pros and Cons of Sage Inventory System

Inventory system

Sage offers various inventory management solutions tailored to different business sizes and industries. Here are some pros and cons of Sage inventory systems:

Pros:

Cons:

In summary, Sage inventory systems offer scalability, comprehensive features, integration with accounting, customisation options, and advanced functionality. 

However, they may also be complex, expensive, have a steep learning curve, require specific system requirements, and vary in the quality of customer support. Businesses should carefully evaluate their inventory management needs and consider these pros and cons when choosing a Sage inventory system.

Please read our blog on how Verbeek Consulting unlocks growth switch Sage Accounting.

Alternative Cost-Effective Inventory System Solutions

Cost-effective inventor solution

When looking for a cost-effective inventory system, it’s essential to consider your business’s specific needs and budget constraints. Here are a few options that are known for being relatively affordable while still offering valuable inventory management features:

Zoho Inventory System

Zoho Inventory provides a range of inventory management features at affordable pricing tiers. It offers inventory tracking, order management, multi-channel selling integrations, and reporting tools. Zoho Inventory is suitable for small and medium-sized businesses looking for a budget-friendly solution.

Pros:

Cons:

Square for Retail Inventory System

Square for Retail offers an affordable inventory management solution tailored for retail businesses. It provides inventory tracking, purchase order management, barcode scanning, and reporting features. Square’s pricing is transparent, with no monthly fees, making it suitable for small businesses with limited budgets.

Pros:

Cons:

TradeGecko Inventory System

TradeGecko offers inventory management software designed for small businesses and wholesalers. It provides features such as inventory tracking, order management, purchasing, and reporting. TradeGecko offers competitive pricing plans, including a free trial option, making it accessible to businesses of all sizes.

Pros:

Cons:

inFlow Inventory System

inFlow Inventory is a cost-effective inventory management solution suitable for small businesses. It offers inventory tracking, order management, barcode scanning, and reporting features. inFlow Inventory offers both cloud-based and on-premise options, allowing businesses to choose the best fit for their needs and budget.

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Cons:

Fishbowl Inventory System

Fishbowl Inventory is an inventory management solution that integrates with QuickBooks, making it suitable for businesses already using QuickBooks for accounting. It offers features such as inventory tracking, order management, manufacturing, and reporting. Fishbowl Inventory offers competitive pricing and is scalable to accommodate growing businesses.

Pros:

Cons:

When evaluating the more cost-effective inventory systems, consider factors such as the features offered, ease of use, scalability, customer support, and integration capabilities. Look for a solution that meets your business’s specific requirements while staying within your budget constraints. Additionally, take advantage of free trials or demos to test the software before making a commitment.

Verbeek Consulting: Your Partner in Bookkeeping and Inventory Management

Partnering with Verbeek consulting

When navigating the complex landscape of inventory management, having expert guidance can make a significant difference. Verbeek Consulting specializes in bookkeeping and offers comprehensive services in QuickBooks and Sage accounting systems. With a deep understanding of inventory management, Verbeek Consulting can help small business owners implement efficient inventory systems, streamline their operations, and ensure their financials are in order.

Services offered by Verbeek Consulting include:

Partnering with Verbeek Consulting can transform your inventory management practices, allowing you to focus on growing your business while ensuring your financials are robust and reliable.

Conclusion

Bookkeeping and Invoicing Verbeek Consulting

In conclusion, having an inventory system is crucial for any small business that deals with physical goods. The benefits of an inventory system are extensive and include optimisation of resources, cost management, customer satisfaction, demand forecasting and planning, streamlined operations, financial reporting and analysis, compliance with regulatory requirements, and risk mitigation.

While popular solutions like QuickBooks and Sage offer robust inventory management capabilities, they also come with their own sets of pros and cons. QuickBooks is known for its user-friendly interface and integration with accounting features, but may lack advanced capabilities needed by larger enterprises. Sage, on the other hand, offers scalability and comprehensive features but can be complex and costly.

For businesses seeking more cost-effective solutions, options like Zoho Inventory, Square for Retail, TradeGecko, inFlow Inventory, and Fishbowl Inventory provide valuable alternatives. Each of these systems offers different features and pricing plans that can cater to various business needs and budgets.

Ultimately, the key is to carefully evaluate your business’s specific inventory management requirements, consider both the immediate and long-term needs, and choose a system that not only fits within your budget but also scales with your business as it grows. 

By investing in the right inventory system and implementing it effectively, your small business can achieve greater efficiency, improved customer satisfaction, and a stronger competitive edge in the market.

For personalised assistance and expert guidance in implementing an inventory system, consider partnering with Verbeek Consulting

With our specialisation in QuickBooks and Sage, and extensive experience in bookkeeping, we can help you streamline your operations and ensure your financials are in perfect order. Contact Verbeek Consulting today to take your inventory management to the next level.

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