Inventory Management for Small Businesses: Reorder Levels, Dead Stock and Stock Counts

The reorder level

The reorder level is the stock at which you should place the next order, so the new goods arrive before you run out.

ABC: know which items matter most

• A items: the top fifth by sales value. Check them weekly; never run out.
• B items: the middle. Check monthly.
• C items: the long tail of low-value items. Keep them simple; order in bulk, rarely.

Finding and fixing dead stock

1. 1List items with no sales in the last 90 days.
2. 2Check expiry dates first — those go before anything else.
3. 3Bundle slow items with fast ones, or discount them.
4. 4Return to the supplier where the terms allow.
5. 5Stop reordering them, and remove them from the catalogue once cleared.

Counting stock without closing the shop

Annual stock-taking closes the shop for a day and is wrong again a week later. Cycle counting is easier: count a few items every week — A items more often — and correct the figures as you go. Every difference should be posted as a stock adjustment with a reason (breakage, expiry, theft, data entry).

Keeping stock right automatically

• Sales reduce stock when the bill is made, not later.
• Supplier bills add stock when you record them.
• Returns and credit notes put stock back.
• Adjustments carry a reason, so shrinkage is visible in a report.

Valuing stock

Your closing stock goes on the balance sheet at cost. Most small businesses value it at the latest purchase price or a weighted average; FIFO is more accurate when prices change often. Pick one method and stay with it from year to year.