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Inventory management is the operational backbone for any business with a product to sell. If you are just starting out with a small number of products without many variants, Microsoft Excel is a good tool for beginners to manage inventory. However, efficient utilization of Excel for online inventory management requires time and setting up your initial template accurately is crucial. In this post, we give you tips on building and using an Excel spreadsheet for basic inventory management.
Learn how to manage your inventory, save time and kick-start your business in Excel with this free inventory spreadsheet. Click here to download for FREE. Excel is a program that most of us are already familiar with, whether for accounting, or for forms, so it is a good option for other applications like inventory management. With integrated tools, features, and formulas to make spreadsheets more dynamic and interactive, Excel is also fully capable of handling basic inventory management for small businesses.
While not ideal for a large inventory, Excel is cost effective, or if you use it in OneDrive, even free. While it is extremely easy to make mistakes in Excel, and avoiding them will require time-consuming auditing, proper organization, and strict management, it is fully capable of handling small business inventory.
A basic template for your Excel inventory should include the product number, product name, item description, item price, item cost or value, item stock, quantity to reorder , and if you want to update sales quantity or value, quantity sold. Time to reorder, whether or not the product has been discontinued, total inventory value, and other functions are also very useful, but the more columns you have, the more difficult it is to keep up with everything.
If you would like to gain a deeper understanding of crucial inventory management techniques and how you can apply them to your business, download our free eBook Inventory Management: Everything you need to know. You can then use Excel formulae to automatically calculate information for total sales, total profit, and organize your inventory based on products that sell the most using a few simple formulas.
You can modify Microsoft's basic free template available when you open Excel to your needs, purchase a template, or create your own. Formulae can increase the value of your Excel spreadsheet, while reducing the headache and stress involved with calculating numbers. You can use the SUM function to do math for any figure that you put into two cells. For example, you can create a running sales quantity using the SUM function, to automatically update how much revenue you've earned by doing math based on calculations you put in per line.
This removes the need to go over each line with a calculator every night. This is very useful for creating automatic value totals for the products in your inventory, but if you have lines, you will have to add it to each one.
Sort allows you to order your inventory by number size, or by color, so that you can see products based on sales, profitability, or remaining stock to quickly and easily go through products. Sort will be wrong if any of your data is wrong. Rank allows you to rank items based on sales quantity, based on inventory quantity, or based on the number of products you have received.
Because it makes the most sense to rank high sale items on the top, or rank items that you have to restock on the top, you can use it to organize your inventory based on either specification. Rank differs from sort because sort organizes your data in order at the push of a button, while rank does so automatically. Your rank formula should be written like this: Cell , where the cells mentioned include all of the cells you want to rank.
Now that you've become familiar with the formulae, here are some tips on how to manage your Excel spreadsheet to ensure you are tracking inventory movement accurately:. Many professionals avoid using Excel for inventory management for the simple reason that humans are error prone, and Excel doesn't really have any way of combating this fact. Finding errors on sheets of numbers and hard data is also difficult, unless you know exactly what you're looking for, which is unlikely unless you added the mistake on purpose.
The only way to avoid this is to create a best practice of self auditing, and daily review, to ensure that mistakes are not made. Make sure that anyone handling orders updates the Excel document immediately to prevent issues. Excel is not a real time inventory management solution, so you will never be able to see the real inventory value at that moment, but you can make sure that it is updated as often as possible to circumvent issues like over-selling a product that you cannot backorder.
Traditional offline Excel documents are severely limited because only one person can use the sheet at once. Using Excel in the Cloud OneDrive or Google's alternative ensures that you can invite multiple people to the sheet and edit it at once to improve self-auditing, input data from multiple sources, and speed up processes. It also comes with the added benefit of automatic backups and syncing across all of your devices so that you can edit on an iPad, or on your computer at home.
Taking the time to consolidate your data monthly allows you to create charts that outline how much you sold in each period. You should make these per month, and per quarter, paying special attention to holidays and occasions. One of the biggest issues you will have with Excel is not being able to easily analyze your historical data, but taking the time to add your entire month's data into an easy to read pivot table will fix this.
It is time consuming, but it does allow you to track your sales based on period, and during different seasons, for better inventory optimization in the future. Excel can be a valuable tool for tracking inventory, but it is up to you to make sure that you are tracking and calculating everything necessary.
For example, if you're tracking time to re-order have you included lead times time from manufacturer to warehouse or 3PL in your calculations? Are you calculating profits based on sale, or based on your actual per-item profit?
Are you using your inventory to calculate sales tax immediately? Is your total inventory value based on resale or purchase value? Going over the figures you use in your calculations to ensure that they are correct can save you expensive and time consuming mistakes in the future.
Excel relies on people to input data unless you have a barcode scanner connected to your system, and even then, not everything is automated. This will lead to human error, which can throw off your entire supply and demand when you re-order too much or not enough, or under or overestimate profits. A policy of keeping track of everything on paper as well as in your Excel document allows you to go over your inventory at the end of each day to correct any mistakes. While time consuming, Excel is error prone, simply because nothing is automated, so strict audits and reviews are necessary to ensure the accuracy of your inventory tracking.
Excel simply does not work with large inventory volume because hundreds of columns are too complex and too difficult to track and update, not to mention, a headache. At some point, you will have to upgrade to a dedicated inventory management system , and you should know when to do so. You can consider the number of hours, the headache and stress, and mistakes you save when deciding whether or not to upgrade to a dedicated order management system. Inventory management is an important part of business, and the more sales you are making, the more your need of management increases.
Using Excel will allow you to cut costs at first, but eventually, a dedicated inventory management system will be necessary. Inventory management helps you with everything from optimizing your inventory for better sales and return on investment, to growing your business and expanding to additional sales outlets as your consumer base grows, so your inventory management solution should grow with you. However, Excel is definitely a good option to get you started, especially if you need a low cost or completely free option.
Find more tips on using Excel for inventory management. The total cost of inventory: What it is and why you should know it. Growing their business with better inventory management. Which sales channel is most profitable for your brand? Using Excel as a low-cost inventory management solution Download your Free Inventory Spreadsheet now!
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