How to Maximize Inventory Profits for Your Small Retail Business

This blog post was written by Doran Fluckiger, Wyoming Entrepreneur SBDC Regional Director, Southwest Wyoming.

Maximizing inventory profits can be accomplished by implementing a computerized system to manage, control, and balance your inventory. Many small businesses have a computerized system but fail to use its full functionality. To determine if you are using your computerized system properly answer the following questions:

• Can you create a report of your hottest selling items by day, month, and year?
• Can you determine what each item costs you versus what you sold the item for?
• Can you determine what items sell better in March versus August using your system?

The advantages of answering yes to each of these questions is the ability to order the best selling items, the quantities needed during the season the item sells the best, decrease shipping costs, and allows you to only sell the most profitable items.

Sales history reports that accurately reflect past sales takes the guessing out of what to order and how often to order the item. Retail stores must order items to keep shelves fully stocked, and make substantial orders to reduce shipping, ordering, and handling costs. Ordering inventory for the months of January-March becomes much easier if you know what items sold last January-March, and what items created the best return for you. Accurate sales history reports are essential if you wish to maximize your retail profits.

The most effective way to track sales history of inventory is to place each item you plan to sell into your computerized system. This must be done individually. Using a barcode system allows you to quickly sort and find items within your system when selling them to your customer. Be sure that each item has an accurate sales price and the correct cost. This process can be time consuming in the beginning but saves you substantial amounts of time and money when re-ordering items.

Utilizing your computerized system to generate reports that accurately track sales history of inventory will help you maximize profits for your small business.