management | 6 mins read

Why Inventory Tracking is Critical to Small Business

why inventory tracking is critical to small business
Michelle Jaco

By Michelle Jaco


When it comes to inventory, it is important to keep a record of everything coming in, scheduled to come in, sold, and being used on a regular basis.

Due to the high volume, larger companies usually have entire departments dedicated to inventory tracking because what may appear like a small mistake could wind up a huge loss.

But small businesses are also no stranger to inventory tracking. In fact, it's fair to say that inventory tracking is just as critical to small businesses as it is to their larger counterparts, however, the way in which inventory is monitored varies significantly.

A small business, like a bakery or a coffee shop, typically does not have an expendable budget like that of larger corporations and franchises.

Large businesses can make a mistake and just throw more money into the machine to resolve said mistake, whereas a small business, on the other hand, often cannot afford to make such costly errors.

But the most important factor that effective inventory tracking can provide to small businesses is the power to predict the supply and demand curve. No, it's not magic; it's the final result of analyzing basic inventory metrics, such as stock quantity and how much food is sold.

Here is how inventory tracking can help your small business succeed.

Key Factors

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Here are the key areas of improvement you can expect to see when implementing inventory tracking software into your operations systems.

Customer Service - Tracking inventory helps you avoid dissatisfying customers because you can't deliver on what they ordered.

With good inventory tracking software, you'll always know which products are in stock, which ones are out of stock, and which ones are going to be in stock soon.

Financial Tracking - Inventory tracking can also help you keep better track of your profits. You can accomplish this by logging the sold value, production, shipping costs, and more.

Product Performance - With inventory tracking software, it's easy to find out which products sell the most, which also means that you'll know which products are easier to sell, and which products require more advertising efforts.

Prevent Stealing - If you're a coffee shop or restaurant, you've got a physical location. It doesn't happen often but there are employees that will steal from inventory for their launch break without telling you.

With inventory tracking software, this will be easy to notice.

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Increase ROI Through Inventory Tracking

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Tracking your inventory with the software will give you an easy way to perform analytics that can lead to increased sales, revenue, and profits. By using these analytics, you can simplify the whole process from production to sales and increase ROI along with it.

Analyze Your Inventory
Your inventory tracking software should be able to generate reports about your inventory. What you're looking for here is which products sell the most. Find out which products sell the most, and you can focus your attention on those products because they're easier to sell.

Shrink Your Inventory
The easiest way for a small business to save money using inventory tracking is by shrinking the inventory. Let's say you have enough in stock to make 100 hamburgers and 200 pizzas.

You generate reports through your inventory tracking software and you can see that in the last three months, hamburgers outsell pizzas by about 50%. This leads you to the conclusion that you should keep more ingredients for hamburgers than you keep for pizza.

In turn, this helps you reduce waste by reducing in-stock pizza ingredients and minimizes the number of expired ingredients.

Consider the Circumstances
It's important to consider the circumstances you choose for these analytics. Inventory tracking software can't know if the last three months were school season but you can. It's important not to miss this because it might be the reason you're selling more hamburgers than pizzas.

For example, you might be selling more hamburgers because it's school season and students come during their break. Pizzas take more time to cook, and students might not have enough break time so they choose hamburgers.

During the summer, when students are taking some time off, you might sell more pizzas because fewer people are eating hamburgers and more people choose pizza.

Without considering the circumstances, shrinking your inventory can heavily backfire and you can be left without pizza dough and with a load of burger ingredients that nobody is ordering.

Using Inventory Tracking Software

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A resource that can be used to track inventory is Excel.

It's cost-effective, but the downside is that you will have to spend a lot more time manually monitoring inventory and then logging it into a spreadsheet.

Dedicated inventory tracking software holds quite a few benefits over Excel or any other spreadsheet software due to a number of factors, such as

  • Minimizing Human Error - We're all humans and we make mistakes. But inventory tracking software minimizes that by reducing the amount of manual work you need to do.
  • Tracking Recipe Ingredients - If you own a restaurant, inventory-tracking software can help you know how many of each recipe you can cook with the ingredients you have. On top of that, recipes are right in the app, so any new employee can cook the exact same food as the one before them.
  • Convenient Managing from Your Phone - Yes, you can download the Excel mobile app. But you'll quickly realize that's not practical and easy at all. On the other hand, dedicated software has apps that are specifically crafted to aid in inventory tracking, and they're much easier to use.
This is just a glimpse of what you're getting with dedicated inventory tracking software. You'll find many more things you like if you start using it.


Inventory tracking is critical for small businesses because they have a small budget, and might not be able to rectify a mistake once it's been made. To reduce the chance of making a critical mistake, you need to have good inventory management.

To accomplish that, it's best to use inventory tracking software to manage your inventory. It minimizes human error but also notifies you of any errors so you can rectify them before your business takes a hit.

Whether you're a new business, or you already have multiple locations inventory-tracking software is easy to integrate. But it's much more helpful if you start using it from the beginning, that way you can optimize your production-to-sales process from the get-go.

Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.

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