Inventory is the heart and soul of your business, and it’s constantly moving throughout the supply chain, including:
- New batches of inventory entering your warehouse
- Items getting fulfiled and shipped
- More inventory being ordered, transported, received, and stored
Along with the type of products you sell, your warehouse location(s), and your inventory’s current value — keeping tabs on ecommerce inventory data and information at all times can be challenging, error-prone, and time-consuming. Yet when the accounting period ends, your accountant is going to expect accurate reporting.
That’s why online brands ditch the manual work and implement technology that makes record-keeping a breeze.
In this article, we explore:
- What inventory records entail
- Why it’s important to consistently track inventory
- How to outsource inventory management
What are inventory records?
Inventory records are repositories of data pertaining to each item in a brand’s product line, including:
- What’s in stock at the SKU level
- What’s been sold and reordered
- The product’s value
- The inventory’s storage location
- Other information that pertains to a business, such as work-in-process (WIP) inventory data
Each entry must have a description of the SKU along with relevant data. These records are either created manually or digitally.
Why it’s important to keep up-to-date inventory records
Keeping proper inventory records provides better inventory control and visibility into inventory as changes occur.
Since inventory is noted as an asset in a business’s balance sheets, you will be expected to provide accurate inventory information at the end of a fiscal year or accounting period.
Here is why every business owner should be keeping proper inventory records.
Ensures inventory tracking is accurate
Consistently keeping track of what’s leaving and entering the warehouse ensures inventory accuracy and inventory reconciliation.
Inaccurate inventory counts can lead to inventory shrinkage, or when stock is less than the recorded balance in the accounting record, and it can cause major discrepancies that can throw off profit margins and other financials.
Makes inventory accounting easier
Accurate inventory records make the inventory accounting process much more bearable.
Keeping track of inventory value and count is legally required of all retailers and manufacturers, as per the Financial Accounting Standards Board (FASB) and regulated by Generally Accepted Accounting Principles (GAAP).
By maintaining a proper inventory record-keeping process, you’re also able to track changes in value, so you know how much your inventory is worth at the end of an accounting period.
Helps prevent items from going out of stock
Keeping up-to-date inventory records help you prevent stockouts and have a better understanding on when it’s time to reorder more inventory.
Keep in mind that not having enough inventory can cause out-of-stock issues, but storing too much inventory can increase carrying costs and lead you to potentially accumulate too much dead stock.
Since inventory is constantly moving throughout the ecommerce supply chain, the use of real-time inventory management technology makes it easer to check if all inventory is accounted for when comparing physical inventory and electronic records.
Being able to track inventory without the manual work can reduce risk while optimising operational costs, including storage fees.
Prevents mistakes from being made based off of bad data
If your records aren’t up-to-date, you and your team risk making important business decisions based on incorrect data.
By using technology to track inventory in real time, you can reduce mistakes by cutting out time-consuming, manual work.
Tracking inventory in real time can be done using inventory management solutions, including inventory apps or a more robust system like ERP inventory software. These systems allow you to aggregate data by connecting your upstream manufacturing activities with your downstream sales.
With real-time data tied to inventory, you’re also given the information needed to identify trends and forecast demand, so you can make better predictions on inventory reorder quantities and levels.
Tips for keeping accurate inventory records
Depending on the number of SKUs you sell, your order volume, and the size of your company, the complexity of inventory record-keeping varies.
No matter how intricate your business is, here are some of the top inventory management strategies you can implement.
Keep physical backups
An inventory audit is defined as the process of checking a company’s actual inventory levels against their financial records to ensure accurate inventory accounting. To make inventory auditing more efficient, it is helpful for retailers to keep physical records of all inventory along with online backups (or vice versa).
Keeping original physical copies can be a legal requirement in some states. And, it also secures your information in case of a situation where your cloud server’s integrity is compromised.
Get input from your accountant on what to record and how
Find an accountant you can trust and get their insights into how to keep inventory records for your business.
In most cases, the information you need during the accounting period includes COGS, production inventory (if applicable), beginning inventory, and the value of ending inventory (what’s left over at the end of an accounting period).
You can also ask your accountant for their advice on how to choose the best inventory valuation method based on the type of products you sell and your typical sales volume.
Remain consistent in your accounting methods
There are many ways to track and record inventory. No matter what method you choose, the most important thing is to stay consistent to ensure accuracy.
At the end of an accounting period or financial year, you will need to calculate how much your inventory is worth.
The most common valuation methods in ecommerce include:
- FIFO (first-in, first-out)
- LIFO (last-in, first-out)
- Inventory weighted average (WAC)
- Specific identification method
“We also have easy ways to manage subscription orders as well as expiration dates and lot numbers, so inventory goes in First In, First Out (FIFO).”
Leonie Lynch, Founder & CEO of Juspy
Invest in inventory management software
When it comes to keeping records on inventory, you have two options:
- Update records after a designated accounting period (periodic inventory system)
- Continuously update the records with every transaction (perpetual inventory system)
As your business grows, adapting a perpetual inventory system is your best bet.
This can be done by investing in an inventory management software, which will help you track inventory flow in real time and record live updates without you lifting a finger.
What a good inventory management software should allow you to do
A powerful inventory management software makes inventory record-keeping a breeze.
By automating the tracking of all inventory and real-time changes, you can optimise inventory to meet demand and improve supply chain efficiency.
With the right software, you can easily download records and custom reports, so you have all the information you need when it’s time to meet with your accountant.
Here is a breakdown of how an inventory management software works.
Real-time views of inventory levels across all channels
As you expand your business, you most likely will branch out from selling exclusively on your online store.
Marketplaces (e.g., Amazon and Walmart) and social media platforms (e.g., Instagram and Facebook) provide direct-to-consumer (DTC) brands different avenues to sell through, so they can broaden their customer reach.
That’s why many merchants implement a multichannel inventory management software, which tracks inventory across channels and aggregates records all in one place.
If you partner with a technology-enabled 3PL like ShipBob, you get access to built-in inventory management tools that also allow you to track inventory across channels and distribution centres in one place.
This allows merchants to spread inventory across multiple fulfilment centres and be able to track inventory in real time through one dashboard instead of relying on multiple sources.
“We have access to live inventory management, knowing exactly how many units we have in Texas vs. Chicago vs. New York.
It not only helps with our overall process in managing and making sure our inventory levels are balanced but also for tax purposes at the end of the year. ShipBob simplified the entire process for our accountants and for us.”
Matt Dryfhout, Founder & CEO of BAKblade
Automatically generate inventory reports
Arguably, your inventory management software is only as good as the inventory reports it generates. Calculating and tracking these metrics in spreadsheets or through multiple different integrations can be troublesome.
Inventory management technology automatically aggregates data, so you can pull custom reports whenever you need them.
For instance, ShipBob’s order fulfilment platform automatically pulls reports and data on SKU velocity, inventory days on hand, inventory turnover rate, and much more.
“I used to have to pull inventory numbers from three places everyday and move all the disparate data into a spreadsheet. ShipBob has an analytics tab in their dashboard with all of this information, which is great for end-of-month reconciliations.
It’s really nice to not have to operate three 3PLs. For inventory planning, I love the SKU velocity report, daily average products sold, and knowing how much inventory we have left and how long it will last. The enhanced visibility is great.”
Wes Brown, Head of Operations at Black Claw LLC
Set reorder points based on historical data
Inventory management software allows you to automatically set reorder point notifications, so you can replenish inventory on time without the need to be tracking inventory every hour or manually as each order is placed.
The software pulls insights from historical sales data to give you a better idea of when it will be time to reorder more inventory per SKU, so you can set a predetermined reorder point.
ShipBob’s technology makes this process fast and easy. By setting a reorder point per SKU through the ShipBob dashboard, you will be notified via email when inventory stock reaches the minimum threshold, so you can send ShipBob your inventory in advance.
“ShipBob’s analytics tool is also really cool. It helps us a lot with planning inventory reorders, seeing when SKUs are going to run out, and we can even set up email notifications so that we’re alerted when a SKU has less than a certain quantity left. There is a lot of value in their technology.”
Oded Harth, CEO & Co-Founder of MDacne
How ShipBob helps with inventory records & more
ShipBob is a best-in-class 3PL with premium fulfilment technology that provides transparency and visibility into logistic operations throughout a growing fulfilment network.
Inventory planning and optimisation are faster and simpler with ShipBob’s built-in inventory management software. ShipBob helps you improve your inventory management process by providing the tools, data, and support needed to maintain accurate inventory records, while also fulfiling your orders.
For a more robust solution, ShipBob partners with leading inventory management solutions that integrate directly with our 3PL software.
“One of the greatest features of ShipBob’s software is the inventory management functionality, which lets us track inventory change and velocity over time. Being able to monitor which styles are selling quickly helps us always keep our best sellers in stock.
Additionally, our B2C and B2B order volume changes month to month. Between shipping new collections for wholesale earlier in the year and Q4 madness for direct-to-consumer sales, we’ve been able to get through our heaviest seasons while staying ahead of production using ShipBob’s inventory forecasting tools — even as our order volume more than quadrupled in less than a year.”
Ryan Casas, COO of iloveplum
To learn more about how ShipBob can optimise your supply chain, click the button below to start a conversation with our team.
Inventory records FAQs
Here are the top questions people ask about managing inventory records.
How do you keep records of inventory?
It’s important for retailers to maintain digital inventory records as it offers accurate data on inventory sold, purchased, and on hand (or available to be fulfiled). Though the process can be done manually, there are plenty of inventory management solutions on the market that cut out the manual work and aggregate data in real time to promote accuracy and speed.
How can I better track inventory?
To better track inventory, technology is key. By implementing inventory management software, you can track inventory in real time, generate inventory reports, and collect data to foresee future demand and identify common trends.
How long should I keep historical inventory records?
Every state’s jurisdiction has different laws about how long you need to store inventory records. The good thing is with electronic record-keeping, you can store all the inventory data permanently or for as long as you need.