Your retail inventory is always changing. Each product touches many hands prior to the purchaser. And it’s critical that any retail owner or manager knows exactly whose hands are touching it and where it is at all times. After all, powerful retail inventory management is key to ensuring future profits and satisfied customers. Unfortunately, many retailers use an inefficient system, leading to higher labor costs and more errors. That’s why we recommend investing your time into better retail inventory reconciliation. Basically, this ensures that your actual recorded inventory amounts match your order and sales histories. With the best retail POS system, it’s easier to implement than you might imagine, and you’ll quickly notice the results: better inventory organization saves you time, money, and peace of mind.
See Also: 7 Tips for the Best Retail Inventory Management
How Inventory Used to Work
Well, “used to” isn’t quite accurate because many retailers are still using antiquated inventory reconciliation. What used to be more common, then, is that retail stores would do a massive, storewide count once or twice a year. This would often involve shutting down the store for a business day in order to effectively complete it. In other cases, staff would be asked to stay late to complete a count, leading to higher labor costs.
Using an Excel spreadsheet, or even simply a pen and ledger, staff would need to go through each product individually, matching each product number with a written list. These would need to be double or triple checked for unavoidable human error. Non-serialized items would need to be compared to supplier invoices or delivery receipts.
Inevitably, each retailer would encounter discrepancies. These discrepancies, or shrinkages, might be minimal, but could also be massive, gravely impacting business. Moreover, identifying the reason for the error – bad math, misplaced products, unaccounted returns, missing paperwork, supplier mistakes, staff theft, miscounting, etc. – would be nearly impossible. Trying to go back through an entire year’s worth of invoices, receipts, and spreadsheets would be more time consuming than the whole count itself. Finally, even if the issue was correctly identified, altering the books by hand is also inefficient.
Why a Modern Inventory Reconciliation Solution is So Important
Making the switch to more thorough inventory management is key to a business’s success. Aside from making sure your product isn’t being stolen or lost, poor inventory counts mean you’ll easily be over- and under-stocked. Overstocks are a major nuisance and can tie up your capital. Understocks are worse; customers who come to your retail store for a certain product are unlikely to ever return if it’s unavailable. The retail world is a competitive one and customers value convenience and reliability.
Different Methods of a Better Inventory Management System
While we’ve established that counting the entirety of your inventory in one fell swoop has its pitfalls, it’s worth noting that there is one situation where it’s beneficial. If your implementing a new inventory or point of sale system, it’s a smart idea to count everything at the beginning so that you’re starting fresh with accurate information. Otherwise, try one of the retail inventory methods below.
1) Cycle Counting
This breaks the process into much smaller pieces. Rather than plan a massive annual or biannual count, schedule regular small counts. This makes it routine for your staff and guarantees more accuracy. It also allows you to pinpoint any issues much more easily. Depending on your retail store and the size of your inventory, this can be completed on a weekly, monthly, or even quarterly basis. Just choose a slower time of the day when your staff can do so without interrupting anyone’s shopping.
2) ABC Retail Analysis
ABC analytics is a great way to further categorize products based on their value to your store. Certain products outperform others. ABC analytics applies Pareto’s principle to retail: 20% of your products account for 80% of your sales/productivity. At its simplest, ABC analysis classifies the best 20% of your products as an “A.” The bottom 20% are labeled “C,” while the middle 60% are designated as “B.” There is plenty of room to customize the categorization for your store. Most retailers include subcategories for even more accuracy. To make it even better, POS system reporting and analytics can do this for you.
See Also: ABC Retail Analysis: ABC Analysis Inventory Management Software
For some merchants, it’s advantageous to run inventory on items that are in season. Focusing on the products that are currently selling prioritizes your time and energy. For seasonal retailers, it’s also even more crucial to prevent out of stock situations.
4) Your Own Inventory Method
Go at it in a way that makes sense to you and your staff. You could count based on warehouse location, department, category, brand, etc. This is fine as long as your inventory is updated in real time. Your employees shouldn’t have to compete over one spreadsheet roaming around. Spreadsheets aren’t dynamic and can lead to failures in communication.
Tips on Making Your Inventory Even More Accurate
Great inventory software is incredibly beneficial, but there are other measures to take that assure your counts are even better.
- Overall Organization: Keep your back of house as impeccably clean and organized as the front. It makes counting faster and minimizes mistakes. Map your store and label shelves and aisles clearly.
- Don’t Be Afraid to Recount: No matter how good your system is, people will make mistakes from time to time. A quick recount might be helpful.
- Be Careful of Units of Measure: Are you counting things as individual units (“eaches”), by the dozen, lbs., crates, or pallets.
- Invest in Other Technology: Besides having a modern retail POS, there are apps that can further help with inventory. Scanner and barcodes on your products can make logging data even easier. Scanning each product upon arrival, count and sale keeps a paper trail from start to finish. You can also set stock par levels for automatic reorder.
- Compare Data: Looking at previous counts and sales reports allows you to anticipate sales trends and order more accurately. You know your business well, so trust your instinct in addition to your inventory management system.
- Watch Out for Employee Theft: Use your inventory analysis to identify any errors or discrepancies. Use your POS software to prevent theft.
Your retail point of sale is no longer just a cash register. It can help your business in so many different ways. For more information on KORONA’s POS solution and our inventory reconciliation tools, click below. Send us a message or give a call to find out more and set up your free trial!