How to Choose an Inventory Management System for Your Small Business 

Inventory control is essential for your home services business. You need the parts and materials on hand to handle any job.  

An inventory management system for your small business can help save you from running out of vital components when you need them most. 

Paper-based systems are common but outdated. They require manual inputs and updates every time a part gets used.  

Spreadsheets may make parts and materials data easier to see. However, these programs require manual data entry, which can lead to errors. 

One study found that 90% of spreadsheets used for business had at least one major mistake. Such problems could lead to missing items necessary for your daily business. If you don’t have what you need, your entire operation could grind to a halt. 

You need high-quality software that helps you avoid such blunders. An inventory system should show you when vital parts or materials are running low. And you should find one that gives you real-time updates. This allows you and your employees to see if you have the parts on hand to complete your current jobs. 

In this article, we will take a deep dive into how inventory management systems work. You’ll learn about the benefits of high-quality software and see the key features you should seek when shopping for your platform.  

We’ll then offer advice on how to find the best options for your business’s demands. Finally, you’ll get tips for starting your search for an inventory management system right now. 

Understanding Inventory Management Systems 

Inventory management involves a circular cycle. First, you order materials. Then, you store them and use them or sell them when needed. When the stock becomes low, you order more products, starting the process again. 

Businesses have to balance these different stages. You must have the inventory you need. But having too much will take up extra space in your warehouse or service trucks. It will also expose you to the risk of wasting money on stock you will never use. 

An inventory management system helps balance your supply of parts, products, and materials. Here are the functions you can expect from this system: 

• Tracking inventory levels: The system shows you how much of a specific item you have on hand. The inventory list gets updated in real-time whenever you scan a new item. Good software revises the list immediately after receiving the newly scanned information. 

• Sending alerts: When items reach a certain level, the system can alert you to order more. Some software can actually order automatically when inventory numbers reach a pre-defined level. 

• Scanning: The system typically relies on barcodes, QR codes, or other identifiers. You and your employees scan these codes instead of entering items manually. 

• Reporting: You can create reports using inventory levels. These can help you track spending or see which products you use the most. Reporting can also help with more advanced analytics. 

Most inventory management systems consist of software. They have a dashboard where you can set alert levels and generate reports. Many options are cloud-based, and you can access them via smartphone or tablet. 

Why Inventory Management Is Especially Important for Small Business 

Small businesses often operate on tight margins. A notable 82% of small enterprises fail because of cash flow problems. Spending too much on inventory you won’t use for a long time can be disastrous. 

 Also, remember that mistakes are more common with paper or spreadsheet management. Such errors can wreak havoc on your budget and operations. 

Plus, you need to meet customer demand. Not having a part on hand can delay service and frustrate customers. They could look to your competitors the next time they need repairs or installation. 

For these reasons, an inventory management system is especially vital for smaller businesses trying to compete in the home services market. 

Benefits of Inventory Management Systems 

Inventory management can help your small home services company. But it does require an upfront investment. It is essential to consider all the benefits so that you understand the full value of software. Then, you can decide if it is worth the investment. 

Here are five of the benefits you get with an inventory management system for your small business: 

Save Time 

Inventory management systems eliminate manual record-keeping. You may still have to scan the items with a handheld barcode reader. However, you won’t have to manually enter SKUs or product ID numbers. 

This streamlined process saves a lot of time for you and your employees. It can also reduce delays caused by the mistakes that are common with manual data entry. You merely have to scan items when receiving them.  

Then, you scan them again when taking them for use or to sell. The software takes care of everything outside of these two quick steps. 

Reducing Waste 

The system can track levels to help you avoid ordering too much or buying inventory too soon. You can reduce three types of waste. 

First, the system keeps you from creating physical waste. With proper ordering levels, you won’t have to throw away outdated or unused parts. Second, you avoid wasting shelf space on items that won’t get used. 

Finally and most importantly, you won’t waste money. Good cash flow requires quickly using the parts and materials you order. Inventory software can track levels so that you only order what you need when you need it.  

This shortens the time between ordering the items and generating revenue with them. 

Making Better Decisions 

You can automatically generate reports and analyze data with good inventory management software. These insights can help you see usage patterns. For instance, you can notice increases in demand for certain items. With these insights, you can adjust your ordering levels. 

You can also project patterns or trends into the future. This step will help you plan for growth. Not only can you prepare to order more parts or materials, but you can also forecast the need for more contractors or employees. 

Scaling Your Business 

A good inventory management platform is scalable. Once you set up your system, it should be able to handle growth. This is critical because you can scale up without changing your inventory management process. 

You may need to adjust order triggering levels and find more shelf space. However, the scanning, ordering, and analysis aspects of the system will remain the same as you grow. 

Improving Customer Service 

Good inventory management means you always have the parts needed to handle a job. Ordering special parts could delay a repair or installation job.  

The extra time might leave clients unhappy. Worse, it could cause them to second-guess their decision to work with you. 

If you have quick access to the necessary parts, you can complete work on schedule. Customers will appreciate you getting done on time or early. It also shows competence and professionalism.  

A competent company will have common parts and necessary tools on hand. They will also be able to order unusual components for quick delivery. 

Key Features to Look for in an Inventory Management System 

The features you should seek in an inventory management system will vary depending on your business and its needs.  

For instance, a renovation company will require a system that can handle a wide variety of parts, materials, and tools. However, a company specializing in installing and repairing a specific appliance may prefer more specialized software. 

That said, every inventory management system needs to have certain functions. Here are the things you should expect your software to do: 

Real-Time Inventory Updates 

One of the drawbacks of manual inventory systems is that you only update them periodically. You have to wait until the end of the day or week to get an accurate picture of your stock. 

To avoid this, you should get a platform that updates inventory numbers as soon as an item gets scanned. These features are usually available if you have a Wi-Fi connection. They can also sometimes work with Bluetooth capabilities or a radio signal. If you scan with a tablet or smartphone, the information could be transmitted over a cellular data network. 

With these capabilities, you get a real-time picture of your inventory. Also, you can get low-supply alerts immediately and order replacements quickly, avoiding running out of important items. 

Mobile Connectivity 

You don’t want your inventory tracking tied to a single desktop. Find software that is hosted in the cloud. You can then access your platform from anywhere with an internet or data connection.  

This feature is extremely useful when you are on a job. You can simply open an app on your phone and check inventory levels. You can also get reorder alerts even when on a job or on the road. 

Mobile accessibility is especially vital for small businesses. You are likely not managing things from an office but from your work van or truck. With a mobile app, you can oversee inventory while working without missing any information or alerts. 

Automation 

The purchase order will go directly to the supplier. They will hopefully fill it to resupply you as soon as possible. 

Automated reordering can save time. The system can order items for you when their numbers reach a certain threshold. For instance, you can tell the software to buy air conditioner coils when there are 10 units remaining in your warehouse.  

Automation saves you from having to respond to low-supply alerts. If the orders get filled and shipped quickly, you can keep less product on hand. This streamlines your cash flow. 

Analytics and Reporting Features 

Inventory management generates a lot of data. You’ll have information about parts usage and order history. An inventory system with built-in analytics lets you see patterns in this information.  

For instance, you might see that demand is higher for certain items during specific times of year. You can prepare by increasing your supply the month before. This step ensures you have stock on hand. 

Analytics can also help you find errors. Perhaps the data shows that some parts remain in your warehouse for a long time. You can use this information to reduce your supply. For example, you might wait until there are one or two units remaining before reordering. And you can reduce the number you buy when resupplying. 

Overall, this feature can help you make more informed decisions in every aspect of inventory management. 

How to Choose an Inventory Management System for Your Small Business 

You can find many software providers offering inventory management systems with desirable features. The next step is to narrow down your list. Here are five factors: 

Set Your Budget 

An inventory management system for your small business will require an investment. You’ll either pay a licensing fee or a subscription. The first step in choosing the right option is to make sure it fits your budget. 

Decide how much you can pay monthly, annually, and as a one-time fee. Obviously, your purchase shouldn’t strain you financially. Look at the price range for the products with the features you need. Do they fit with your budget? 

But don’t stop there. Consider any setup, maintenance, or training costs. And look at the price of hardware, such as barcode scanners and a Wi-Fi or data connection for your warehouse or storage area. 

You can then limit your search to software that fits your budget in terms of total cost. 

Consider the User Interface and Learning Curve 

Any system you choose should have a user-friendly interface. What does this mean? You should be able to use it intuitively. This is important for two reasons. 

First, you need to navigate to see inventory levels and make reports that call up specific data points. The process to do this shouldn’t be complicated. It may take some training or direction. But it should not require advanced computer skills. 

Second, you need to be able to set inventory levels and pre-fill purchase orders. These features may require a little more training. But again, you shouldn’t have to do any coding or go through more than a few steps.  
 
Automatically eliminate overly complicated software. You can usually test the user interface through a demo. During this trial, you should be looking at ease of use. 

Research Customer Support 

Even if a system is easy to use, you may have questions. You likely don’t have time to scan through support forums or YouTube tutorials. You need someone to explain it to you quickly so you can get back to work. 

Look at each software vendor’s customer support setup. You should be able to get phone support. Also, look for text, email, and chat options. You should have multiple ways to get in touch with customer service reps quickly. 

When you look at reviews for each provider, look for customer service references. It’s nice to have polite and friendly reps. But you should really focus on how timely and helpful the service was.  

Were the problems solved quickly? Were the explanations or directions clear? A majority of the reviews should answer “yes” to these questions. 

Check Integration Capabilities 

Inventory management software can streamline your operation. But it can save even more time if integrated with other systems.  

For instance, your inventory program could send order information to your accounting platform. It will automatically add your inventory costs to your business expenses. 

Such connections are only possible if the two systems are compatible. See if such integrations are possible with your inventory system shortlist. 

In addition to accounting, you can consider enterprise resource planning (ERP) integrations. You can also look at customer relationship management (CRM) software compatibility.  

CRM systems can hold information like which parts or brands specific customers use. 

Get the Right Scanning System 

There are several different options for scanning items. Handheld barcode scanners can be useful. However, they come at an extra cost. The investment may be worth it if you have a large inventory. 

If you only have a few items, look at smartphone-based scanners. Some software comes with apps or attachments for scanning barcodes or QR codes.  

These can be useful and cost-effective. However, they may be cumbersome if you have to scan a lot of items quickly. 

Advanced options like radio frequency ID (RFID) tags can streamline inventory check-in and check-out. However, tags and readers may be more expensive. 

You need to choose the scanning option that works best for you. Then, make sure the software can support it.