Businesses of all sizes must be able to report on financials, output, and sales, among other data points.
Having accurate and timely numbers available helps you make sound decisions and run operation smoothly. That’s why inventory tracking is key for retail, wholesale, and manufacturing businesses.
Business owners must keep products in stock without tying up cash in huge amounts of inventory.
To do that, you need accurate numbers to understand when it’s time to reorder and what the reorder quantity should be. Patterns in your inventory and sales can even help you forecast future demand, so you can budget appropriately and launch promotions if needed.
All of this information comes from having the right inventory system in place and evaluating it regularly. This allows you to generate inventory reports that clearly show you what you have and what you need.
Before we dive into too many details let’s go back to the basics: What is an inventory report and how can inventory reporting make it easier to run your ecommerce business?
What is an inventory report?
An inventory report is a summary of the amount of inventory a business has on hand at a given time. The inventory report is a physical or electronic document with numbers representing product you’re able to sell now, inventory you are ordering, or inventory you need for internal business use.
Good inventory reports contain up-to-date information with a high level of detail and use visuals to make it clear how many of a given item you have in stock. Inventory reports help you avoid over-ordering inventory or running out of inventory when customers buy your products online.
Inventory reports are helpful — and necessary — in a wide variety of ways.
What are inventory reports used for?
Inventory reports help you run your business without interruption or breaking the bank. They can help you cut costs and reduce the risk of running out of stock. Inventory reporting may just seem like extra time or paperwork, but it can save you a ton of money and unnecessary effort.
One of the biggest uses of inventory reporting is managing inventory. You need to know what you have to ensure you don’t run out before customers’ orders are fulfilled. Ordering too late results in out-of-stock items and lost sales. Ordering too much too soon ties up your cash, increases your risk of damaged inventory, and requires more space for warehousing. Accurate inventory reporting tells you exactly when your stock levels reach the reorder point so you can restock.
Inventory tracking (within warehouses)
If you have a large amount of inventory and high sales volume, you need to track the locations of your inventory within the warehouse(s) you use for order fulfillment. Tracking SKUs by inventory storage location and keeping everything organized can make your job easier by preventing unnecessary movement, double-handling of products, and even lost inventory.
It can also help you:
- Keep track of items ordered within a certain date range
- If you order from more than one supplier
- Identify affected products in the case of a recall
- If you need to return damaged merchandise
If your inventory is perishable, or regularly changes in cost, you may need to track the location for the sake of FIFO (first in first out) or LIFO (last in first out) inventory rules.
Depending on your industry, there could be a number of ways to categorize your inventory. Looking at a mountain of cardboard boxes, it can be very unclear to see what’s what.
A list of items in each category that’s updated in real-time allows you to track inventory as it moves throughout the supply chain. For instance, manufacturers often need to track inventory as raw materials, goods in process, or inventory ready to sell. The inventory valuation of each category or step is a necessary part of tracking the cost of goods sold for tax purposes and inventory accounting.
Once it’s in your fulfillment center, you’ll want to track each product as inventory received, stowed, picked for an order, packed in a box, and shipped to a customer.
How to write an inventory report
You can create a basic inventory report in Excel or Google Sheets to track inventory; However, this does not allow for automated updates and only represents a snapshot at one point in time. A best practice for inventory reporting is to connect the systems that utilize your supply chain and customer order data (more on that below).
Here are the steps to create a basic inventory report that requires manual updating.
1. Create a column for inventory items
Similar to an inventory sheet template, create a list of items in your inventory using a vertical column. This should be done at the SKU level (i.e., if you have a red shirt in four sizes, you would list out each size for a total of four entries, not one) and can be recorded as the SKU name. The more SKUs you have, the more difficult and time-consuming it will be.
2. Create a column for descriptions
Describe the items in another column. If you have a variety of colors, sizes, etc., you can provide more context or detail here to validate what makes it a unique product for inventory reporting and tracking purposes.
3. Assign a price to each item
List the price of each item so you can quickly pull out the total value of your inventory and the value of each item, based on price and quantity. Depending on your business, you may need to track the purchase or manufacturing cost separately from the selling price. Inventory valuation can also help you calculate inventory carrying costs.
4. Create a column for remaining stock
Next, add a column to track the number of units currently in stock. This column will be updated with new purchase orders and sales orders to make sure the number is current.
5. Select a time frame
How frequently you choose to update your inventory report will depend on your needs. The higher your sales volume, the more often you’ll update it since your numbers can change rapidly.
Frequency would also depend on how much safety stock you carry. If you have a cushion of inventory between your reorder point and zero, you can get away with less frequent updates. Just remember that excessive safety stock adds to your expenses.
Inventory reporting for ecommerce
A retail shop with a stockroom requires inventory tracking, but their needs are very different from an ecommerce business owner when it comes to inventory management.
Unlike a physical business, ecommerce purchases are made outside of regular hours and from all corners of the world. This can put ecommerce businesses that are gaining traction at a higher risk of running out of an item when a customer is ready to order.
Ecommerce business owners need to reduce the chance of this happening. Inventory levels should be updated as often as possible to ensure accurate and complete numbers. The only way to truly keep accurate inventory is to use an automated system that syncs with your point of sale software and updates your inventory with each and every sale. That way, you always know exactly what you have and can reorder merchandise or supplies right on time.
Automate your reporting with ShipBob
ShipBob simplifies the process for ecommerce sellers through accurate inventory reporting. ShipBob connects to your ecommerce store and handles ecommerce fulfillment for you. All of your inventory is stored at any combination of ShipBob’s warehouses throughout the United States, and they handle inventory reporting on-site and online.
By syncing with your ecommerce platform, inventory reports are updated in real-time to reflect exactly what you have in stock, minute by minute. You can access detailed reports, complete with charts and graphs, to help you see your stock at a glance. Check out ShipBob’s advanced reporting features to learn more and see what your inventory reports could look like for your business.
Download inventory report templates for free
If you’re ready to create your own reports to track your inventory, get started with our free inventory report templates below.
You can customize them to fit your unique business and products.
Which solution is right for you?
Creating manual inventory reports can be the perfect solution for smaller businesses with low sales volume. If you’re able to keep an eye on your stock levels and update often enough for accuracy, a spreadsheet-based report may be all you need. Use the templates above to create your own now.
If your business has a large sales volume, sells online through an automated platform, or is growing quickly, automated inventory tracking is your best bet. ShipBob offers the perfect solution to keep your items in-stock, help you cut costs, and avoid lost sales. To learn more about ShipBob’s order fulfillment services, including full inventory solutions, request a pricing quote.