How to track inventory in a small shop

Inventory tracking is keeping a running answer to one question: how many of each product do I have right now? You could answer it by walking the shelves. Tracking lets you answer it from the counter, or from home, without moving a single box.

The idea is simple. Every product has a number. When stock arrives, the number goes up. When you sell something, the number goes down. Now and then you count the shelf and check that the number is right. Everything else in this guide is just a way of doing those three things reliably.

Done well, it gives you three things that are hard to get any other way. You know what to reorder before you run out. You know what sells and what only sits there tying up your money. And you notice when stock goes missing, because the number on paper stops matching the shelf.

Most small shops start with memory. That works until the shop gets busy, or a second person starts serving, or you take a day off. The moment two people need the same answer, the answer has to live somewhere other than your head.

Keep the list short at first. Each product needs only a few details to be useful, and you can add more later.

• Name: the way you and your staff say it, so everyone finds the same product. Include the size, such as "Cooking oil 1L", so two sizes never share a line.
• Selling price: what the customer pays.
• Quantity: how many you have right now.
• Cost: what you paid for it. Optional at the start, but you need it later to work out profit.
• Minimum: the quantity at which you want to reorder.

1. List your products

   Write down each product with its name and price. A notebook page, a spreadsheet or an app all work. The format matters less than keeping everything in one place. If you are weighing the options, see spreadsheet or inventory app.

2. Count everything once

   Count each product on the shelf and in the back. Write the number beside it. This is your starting stock, and every later number builds on it, so take your time and count twice if you are unsure.

3. Record stock coming in

   When a delivery arrives, add the quantities to your list the same day. Check the delivery against what you ordered while the driver is still there.

4. Record stock going out

   Sales take stock off the list. So do damaged, expired or lost items. If it leaves the shelf for any reason, it should leave the list too.

5. Count again and compare

   Once a week, count a handful of products and compare the shelf to your list. Fix any difference and write down why you think it happened.

Here is one product over one week. It is a 500 ml bottled water that costs you $1.00 and sells for $1.75.

The list says 20 but the shelf holds 18. Two bottles are unaccounted for. It could be a sale that never got written down, a bottle given away, or a miscount. You cannot tell which, but you now know something is off, and that is the whole point of tracking.

What the numbers tell you

• You sold 51 bottles at $1.75, which is $89.25 in sales. At a cost of $1.00 each, the gross profit is $38.25.
• With 18 left and about 7 selling a day, you have roughly two and a half days of stock. Time to reorder.
• Two missing bottles cost you $2.00 at cost price. Small, but if every product loses a little each week, it adds up.

Now the whole shelf

A single product is easy to follow. Here is the same Sunday count across five products, with the quantity the list expected and what was actually on the shelf.

Three products are off. Two missing bottles of water ($2.00), two missing bottles of oil at $4.50 cost each ($9.00), and one extra bag of sugar, which probably means a sale was entered twice or a delivery was short. Net, the shelf is about $9.60 lighter than the list says. That is not a disaster, but at that rate it is close to $500 a year, and it is only five products.

A minimum is the stock level at which you reorder. Pick it by asking two questions: how many do I sell in a day, and how many days does my supplier take to deliver?

In the example, you sell about 7 bottles of water a day. If the supplier needs two days, you need at least 14 bottles to cover the wait. Add a few extra in case a busy day or a late delivery catches you out, and set the minimum at 20.

Review minimums every month or so. Products speed up and slow down with the weather, the season and the month, and a number that worked last quarter may be wrong now. For the full method, read how to set reorder points.

Trying to track everything at once

A list of 600 products that is half wrong is worse than a list of 30 that is right. Owners who start big usually give up in week two, when the list falls behind and no one trusts it. Start with the fast sellers and widen the list as the habit sticks.

Updating the numbers later

"I will fix the list on the weekend" is how lists go wrong. By Saturday you will not remember which deliveries came in or what was thrown out. Record each change on the day it happens, even if it is a quick note you tidy later.

Ignoring damaged and expired stock

Stock leaves the shelf in ways that are not sales: dropped bottles, expired packs, samples, items taken home. If these never reach the list, the list keeps claiming stock you do not have. Give each of them a reason and record it like any other change.

Counting only when something goes wrong

If you only count after a surprise, you only ever find out too late. A small, regular count catches drift while it is still a bottle or two. See how to do a stock count for a way to do it without closing.

One name for two products

"Cooking oil" for the 1 L bottle and the 5 L jug will cause trouble. Use the size, brand or variant in the name so every line means exactly one thing. Duplicate names are also how the same product ends up listed twice, with the quantity split between them.

Letting everyone change the numbers

When any member of staff can adjust stock with no record of who or why, mistakes cannot be traced. Decide who receives deliveries and who corrects counts, and keep a short note of the reason each time.

1. Record changes the same day. A number you update tonight is right. A number you plan to update on the weekend is already wrong.
2. Give one person the job of receiving deliveries, so there is always someone who checked quantities against the order.
3. Write down why stock changed: sold, received, returned, damaged, expired or lost. Reasons help you see where money leaks.
4. Count a few products often, rather than everything rarely. A short count on a quiet afternoon is easier to keep up.
5. Treat a mismatch as information, not an accusation. Find out why, then fix the record.
6. Keep the back room tidy. Stock that is stacked and labelled is stock you can count in minutes.

Work through these in order. None of them needs special equipment, and the first four fit in an afternoon.

• Pick your top 20 to 30 products by how often they sell.
• Write each one with its full name, size and selling price.
• Count each product on the shelf and in the back, and record the starting quantity.
• Add the cost of each product if you know it. Skip it for now if you do not.
• Choose a reorder minimum for each, even a rough one.
• Decide who records deliveries, and do it the day the delivery arrives.
• Record every sale, plus damaged, expired and lost items, with a reason.
• Every week, count five products and compare them to the list. Write down the difference.
• Once a month, review your minimums and add the next batch of products.

Everything above works with a notebook and a pen. The hard part is keeping it up when the shop is busy. Shopkeepa is built to take that work off you.

Every sale takes stock off automatically. Deliveries go in with Stock In, and every change, including damaged, expired and corrected stock, is kept as a record you can look back on. Set a minimum for a product and Shopkeepa gives you one reminder when stock crosses it, plus a restock list with a suggested order. See inventory tracking for more.

Shopkeepa is in development, and early access shops will help shape it.