What Do E-Commerce Companies Need to Consider When Tracking Inventory?
Out of stock products? Orders you can’t fulfill? Then your e-commerce business probably needs to get a better handle on inventory management and tracking.
Mastering the supply chain and improving e-commerce inventory management will be critical to your success when running an e-commerce business. One of the most important pieces of the puzzle is knowing how to track inventory accurately.
In this guide, we’ll tell you what your e-commerce company should know about tracking inventory.
What is E-Commerce Inventory Management?
E-commerce inventory management is the process of tracking available business inventory. This includes tracking the amount of stock you have, the pricing, and the location of products.
You need to be sure that you have stock available when needed. Since you’ll often be acting as a middleman between customers and suppliers, it’s important to optimize inventory management so that deliveries will be fast and efficient.
Keeping close track of inventory and predicting your needs accurately will help ensure the success of your e-commerce company.
Common Problems With E-Commerce Inventory Tracking
There are several common problems that e-commerce businesses face. Here are some of the issues you should be aware of.
Overstocking and Overselling Inventory
If you don’t track your inventory well, you may end up buying too much stock. You may have a hard time moving it if you haven’t tracked sales well and haven’t accurately predicted the demand for a product.
The opposite is also a problem. If someone is purchasing a product and you don’t have it in stock, it can lead to delays or you may be unable to deliver it.
Over-Reliance on Manual Inventory Management
In the beginning, many e-commerce businesses rely on manual methods of tracking inventory and fulfilling orders. However, this can get difficult once the business grows larger.
Scaling a business while using manual inventory management may lead to big errors and problems as time goes on.
Failing to Forecast Demand
Another e-commerce inventory tracking mistake is failing to forecast demand.
In order to avoid overstocking and overselling mistakes, you need to be sure that you look at as much data as possible. This can help you understand how your inventory will move throughout the year.
Tracking your inventory closely using inventory tracking software such as QuickBooks can help you identify patterns when it comes to e-commerce purchases.
Best Practices For Inventory Tracking and Management
So, what can you do to face these challenges? Here are a few tips that can help.
Analyze Past Sales
Work to understand how each product category will fluctuate in demand throughout the year.
One of the best ways to get insight into this is to look at your past sales. Using online tools such as Google Trends and Google Analytics to analyze trends in different product categories can also be helpful.
Forecast Future Demand
Make sure that you’re recording sales data and forecasting future sales from the very beginning. This will help you manage your inventory more effectively as time goes by.
Based on the data you collect, you can get a better idea of what you should have in stock and when.
Keep Safety Stock
Being sure that you have a bit of extra stock maintained can be helpful and can allow you to be prepared for unexpected product demand.
You shouldn’t overdo it and risk being overstocked. However, having a bit of safety stock is very important for ensuring that your e-commerce business keeps operating smoothly.
How to Keep Track of Inventory With QuickBooks
To improve inventory management for your e-commerce business, use inventory management software such as QuickBooks.
Be sure to record inventory on the QuickBooks balance sheet when you buy products to keep in stock. Then, update it when products are sold. Once you’ve sold a product, make sure to move it from current inventory and record it in Cost of Goods Sold (CGOS) instead.
By keeping accurate records with QuickBooks Online, you’ll maintain a clear picture of your inventory. Keep in mind that you’ll need to have a QuickBooks Online Plus or Advanced plan if you want to start tracking your inventory using the software.
Here’s how you can use QuickBooks to manage your inventory step by step.
1. Enable Inventory Tracking
To manage inventory in QuickBooks, you’ll need to turn on inventory tracking in your settings.
- First, you’ll want to go into settings and select Account and Settings
- Next, go to the Sales tab
- Click Edit in the Products and Services section
- Turn on the options for quantity and price tracking and for tracking inventory on hand
- Select Save
After changing these settings, you’ll be able to input product and inventory information and manage your orders with the software.
2. Add Your Products
The next step to using QuickBooks to manage inventory is to add products and services that you sell into the system. First, you’ll want to add inventory items to set and track quantities of products.
You may also want to add non-inventory items as well. This may include components of products that you count separately from the products themselves.
If you offer any services, you can also add these into the system as service items.
3. Track Your Sales
Once you’ve added your inventory products to the QuickBooks system, you can start tracking what you’re selling.
To do this, you’ll create invoices and sales receipts as products are sold to a customer. QuickBooks will automatically reduce the inventory quantity data based on what is stated in the invoices and receipts you create.
4. Restock
As you sell more products, you can start looking at QuickBooks to see exactly how much inventory you have left. QuickBooks will notify you when it’s time to restock items and can order new inventory for you automatically if needed.
As you add inventory orders into QuickBooks, the inventory quantity will adjust automatically. This means that you’ll always have an accurate count of your inventory.
Final Thoughts
If you want to master e-commerce inventory management, make sure that you have a great system for tracking your supply. Be sure that you use the tips above and make use of QuickBooks if you want to track inventory accurately and efficiently.
Need help with accounting, taxes, financial reporting, or payroll for your e-commerce business? Contact us today to learn more about what we can do for you.