To track inventory, give every item a record with a unit and cost, log each stock movement with a reason, count regularly to catch differences, and reorder when stock falls to daily usage × lead time + safety stock.
Tracking inventory means knowing, at any moment, how much of each item you have, what it cost, and when you need to buy more. For a small business it comes down to four habits: keep a clean record for every item, record every movement with a reason, count often enough to catch mistakes, and reorder at a point you have worked out rather than guessed. The method below works with a notebook, a spreadsheet or inventory software, in any currency.
Decide what is worth tracking
Not every item deserves the same effort. A useful way to decide is ABC analysis: rank items by how much money they represent over a period (units sold × cost), then split them into groups. The few items that make up most of the value get careful tracking; the long tail of cheap items gets lighter treatment.
| Group | Typical share | How to track | How often to count |
|---|---|---|---|
| A — high value or fast moving | About the top 10–20% of items | Exact quantities, every movement recorded | Weekly or more often |
| B — middle | The next 20–30% | Exact quantities, movements recorded | Monthly |
| C — low value, slow | The remaining items | Approximate, or a simple reorder card | Quarterly |
The percentages are a starting point, not a rule. A café might track coffee beans, milk and bottled drinks closely and leave sugar sachets and napkins on a “reorder when the box is half empty” system. A phone-accessories shop might track every item because each one has a barcode and theft is a real risk.
Set up a clean record for every item
Each tracked item needs a short, consistent record. Most problems later — duplicate items, wrong counts, profit figures that make no sense — trace back to sloppy records at the start.
- Name that staff recognise, written the same way every time.
- SKU or barcode, so scanning or typing a code finds exactly one item.
- Unit you count in: each, kg, litre, box of 12. Buy in boxes and sell singles? Record the single and convert on receipt.
- Cost price per unit, so you can value stock and calculate profit.
- Selling price.
- Low-stock threshold or reorder point (see below).
- Category, so counts and reports can be done by section.
Record every movement with a reason
Stock changes for only a handful of reasons. If every change is recorded with one of them, you can explain any number on the shelf. If changes are just overwritten, you lose the story: you will know you have 12 when you expected 20, but not whether the 8 were sold, spoiled or stolen.
| Reason | Direction | Example |
|---|---|---|
| Purchase / delivery | In | 48 bottles received from the supplier |
| Sale | Out | Recorded automatically if your till updates stock |
| Void or return to stock | In | A sale cancelled before the item left |
| Waste | Out | Milk past its date, a dropped cake |
| Damage | Out | A cracked bottle found on delivery |
| Transfer | In or out | Stock moved to a second location |
| Recount | Either | Correction after a physical count |
Count regularly and measure shrinkage
Records drift. Items are mis-scanned, deliveries are short, things break and nobody notes it, and some stock walks out of the door. A physical count compares what your records say with what is really there. Rather than one exhausting full count a year, most small businesses do better with cycle counts: a few categories each week, so every item is counted on the schedule from the ABC table.
The gap between expected and counted stock, after every known movement is recorded, is inventory shrinkage. Worked example: your records show 120 units of a bottled drink, and the count finds 112. Shrinkage is 120 − 112 = 8 units. At a cost of $1.50 per unit, that is 8 × $1.50 = $12 of stock lost. As a rate, 8 ÷ 120 = 6.7% of what should have been there. One count tells you little; the same item short every week tells you where to look.
- Count at a quiet time, before opening or after closing, with sales paused.
- Count without looking at the expected number first, so it does not influence you.
- Recount any item that is more than a few units or a few percent out.
- Record the correction as a recount, not by quietly editing the number.
- Note the value of the difference at cost, and compare it with previous counts.
Reorder at a calculated point
The reorder point is the stock level at which you place a new order, so that the delivery arrives before you run out. The formula is: reorder point = average daily usage × lead time in days + safety stock. Lead time is the number of days between placing an order and having the stock on the shelf.
Safety stock covers the days when you sell more than usual or the supplier is late. A common simple method is: safety stock = (maximum daily usage × maximum lead time) − (average daily usage × average lead time).
| Input | Value | Working |
|---|---|---|
| Average daily usage | 15 units | From the last four weeks of sales |
| Average lead time | 4 days | Order Monday, on the shelf Friday |
| Maximum daily usage | 20 units | Busiest day in the period |
| Maximum lead time | 5 days | Slowest recent delivery |
| Safety stock | 40 units | (20 × 5) − (15 × 4) = 100 − 60 |
| Reorder point | 100 units | (15 × 4) + 40 |
When stock of this item falls to 100 units, you order. How much to order depends on how often you want to order and on supplier minimums. A simple approach is to order enough to cover the days until your next regular order plus the lead time. If you order every 7 days, you need about 15 × (7 + 4) = 165 units to cover the gap, minus the stock you hold above safety stock. Ordering at the reorder point of 100, with 40 of those kept as safety stock, that is 165 − 60 = 105 units. You can check your numbers with the reorder point calculator.
A related measure is days of cover: stock on hand ÷ average daily usage. With 100 units and usage of 15 a day, you have 100 ÷ 15 = 6.7 days of cover. It is an easy number to scan across many items, because anything with fewer days of cover than its lead time needs ordering now.
Watch for dead stock
Dead stock is inventory that has not sold for a long time. It ties up cash, takes shelf space and may expire. Multiply the units of each slow item by its cost to see the money involved: 30 units of a candle that cost $6 each is $180 that has not turned into sales. Decide what to do with it — discount it, bundle it, return it to the supplier, or stop reordering it — and note what you learned for the next order.
A weekly inventory routine
- Record all deliveries received this week, checked against the delivery note.
- Review the waste and damage log.
- Cycle-count this week’s categories and record recounts.
- List items at or below their reorder point and place orders.
- Look at the ten slowest items and decide whether to keep ordering them.
Doing this in SageBizet
In SageBizet inventory, each item has a SKU, unit, category, selling price, optional cost price and low-stock threshold, and stock tracking can be turned on or off per item. Sales from the till decrement stock automatically, and every manual change is recorded with a reason: purchase, sale, void restock, recount, waste, damage, transfer or other. Low-stock and out-of-stock items are flagged, and the Sage Advisor shows days of cover at the current rate of sale with a suggested order quantity. Insights lists dead stock and the money tied up in it, and the item list exports to CSV if you want to work in a spreadsheet.