The 5 Best Practices of Ecommerce Inventory Management

Inventory management is a vital, but often overlooked, aspect of running a profitable ecommerce business. It can impact your customer relations, your sales, your fulfillment speed, and most importantly, your bottom line.

Inventory management is a vital, but often overlooked, aspect of running a profitable ecommerce business. It can impact your customer relations, your sales, your fulfillment speed, and most importantly, your bottom line.

The key goal of inventory management is to know how much stock you have, where it is, and where it’s going. Keeping up with this information isn’t the most exciting part of running a business, but inventory management mistakes can lead to unexpected stockouts, shipping errors, oversells, loss of customers, and even your store being suspended from marketplaces.

A strong inventory management strategy will allow you to run lean, scale your business, ship faster, and increase your sales.

What Does Good Inventory Management Look Like?

Implementing a killer inventory management strategy doesn’t have to be expensive or difficult. In fact, it’s surprisingly simple. There are five general tips I give every ecommerce business owner I get a chance to talk to.

Use Uniform SKUs and Master SKUs

If you’re selling multichannel, inventory management will be a lot more difficult if you aren’t using uniform SKUs. The stock keeping number you use for a product should be as similar as possible no matter how many channels you’re selling that product on. This helps clear up any confusion as to your overall stock count of the product, which cuts down on overselling and stockouts.

Record Purchase Order Data

Do you know how long on average it takes for your purchase orders to be fulfilled? If not, you need to get your hands on this data. Mistimed purchase orders can lead to stockouts and more expensive purchase orders as you try and correct mistakes. Every moment your stock is listed as unavailable, you’re throwing money down the drain. This information will also help you run a leaner business. If you know exactly how long a purchase order will take compared to your average sales, you can make smaller purchase orders and save more money.

Choose a Great Software Solution

Some businesses choose to do their inventory management manually with Excel spreadsheets. I don’t find this a great strategy for any business that wants to grow. It simply isn’t scalable. It might work at 50 or even 100 orders a month, but what about 10,000 sales and hundreds of SKUs? You’d have to spend all day in front of a computer screen. Giving inventory management software a try has tons of benefits over manual inventory management.

  • No human error
  • Cross-channel inventory syncing
  • Automated order routing
  • Low inventory alerts

Picking a great software solution is a key aspect to taking the cap off your business and allowing it to grow while keeping your inventory management airtight.

Know the Seasonality of Your Products

If you sell youth football helmets online, you should know that the beginning of the peewee football season is going to be your highest selling time of the year. This allows you to make sure you’ve got extra stock ready to go. It also means you can run leaner during the offseason. Product seasonality is a major aspect of inventory management. Your stock isn’t a rotisserie oven: you can’t set it and forget it. It should adjust throughout the year. Pulling ecommerce reports on a yearly basis will help you know where your spikes are and be prepared for them, or you can use Google Trends to see when people search for the item most.

Keep Backup Stock for Emergencies

If the worst happens and you end up without any stock to fulfill your orders, it’s a good idea to keep some extra product on hand to fulfill the order yourself. This can come in the form of a backup supplier, a dropshipper, or even keeping a few orders’ worth of items in your own home or storage facility. Remember: this should just be used as a worst-case scenario. Fulfilling your own orders is costly and not scalable. But maintaining the ability to do so if necessary is smart business planning.


This may seem like a lot to do, but the benefits are immediately apparent. Like any good habit, it takes some dedication to start, but once you do, you’ll wonder how you ever managed without it. Start implementing these tips today and you’ll be surprised how much easier and more profitable your business can become.

About the Author

dion beary from ecomdashDion Beary writes about ecommerce for ecomdash, an ecommerce automation software system. He has more pairs of Chuck Taylors than any one person needs.



10 QuickBooks Tips for Product-Based Businesses

Accounting and inventory management are essential components to all businesses, big and small. Here are our top 10 QuickBooks best practices based on a variety of customer service issues we’ve helped alleviate along the way.

This post is brought to you by Lettuce, a simple inventory management tool made for e-commerce and wholesale.

Accounting and inventory management are essential components to all businesses, big and small. Unfortunately, small businesses have it tough considering that most enterprise software is just that: enterprise software.

We’ve been looking out for small product-based businesses for awhile now, helping our customers navigate the treacherous waters of the wholesale and eCommerce world. Here are our top 10 QuickBooks tips and best practices based on a variety of customer service issues we’ve helped alleviate along the way:

Create SKU’s for All Products and Product Variants

1. Create SKU’s for All Products and Product Variants

As your business grows, so will your customers. When you start working with bigger buyers, you’ll discover that they all require unique SKU numbers for every product you sell them. And yes, that includes variations. For example, a dress available in three different sizes should have three different SKU numbers (e.g. DRE-BL-S, DRE-BL-M, DRE-BL-L).

Not only are SKU’s important for your business relationships in the long term, but they’re extremely important to you in the back end. Organizing your inventory with SKU’s for products and its variants gives you the opportunity to have a true inventory count of your entire stock.

Accurately Track Your Inventory

2. Accurately Track Your Inventory

Keep a proper, accurate tally of your inventory. We mentioned that establishing unique SKUs can provide you with a true inventory count – you can see exactly what you’ve got in the warehouse with a quick glance.

In addition to this, regular inventory audits are a must. Go through and physically count all of your products once per quarter. Never find yourself understocked and unable to fill an order.

Use Sales Orders for Faster Order Processing3. Use Sales Orders for Faster Order Processing

Time and time again we come across businesses that jump straight from receiving an order to filling out an invoice. What this does is it deducts the required inventory from your books before you’ve physically moved the product leading to confusion and miscalculations later on in the ordering process.

Instead, before creating an invoice, you should create a sales order. It won’t deduct inventory from your books, eliminating the possibility of inventory discrepancies.

A sales order will just let you know that you need to fulfill a certain amount of inventory. Once you’ve made sure you have the stock and are ready to fulfill the order, you can create an invoice. After that, all that’s left to do is ship the order.

Do Not Create Separate Items for Wholesale & Retail4. Do Not Create Separate Items for Wholesale & Retail

Having a single item listed twice (one for wholesale and another for retail) creates two completely different inventory stacks. We know what you’re thinking – that’s what you meant to do! But frankly, it isn’t in your best interest, especially when it comes to quickly and efficiently keeping track of your inventory.

The best thing to do in this scenario is to have one item listing with multiple wholesale and retail price levels. Then specify if those items are taxable or nontaxable at the order level.

Create Different Price Levels to Ease Inventory Management5. Create Different Price Levels to Ease Inventory Management

Create and implement multiple price levels if you sell across different sales channels or to a variety of customer types.

For example, if you sell directly to consumers at retail pricing, and you also sell to brick-and-mortar shops at wholesale rates, you’ll want different price levels for each. Similarly, if you’ve got a single-site retail store that buys from you as well as a multi-site retailer to whom you’re offering better pricing, you will also want to establish different price levels.

It’s in your best interest to not create multiple SKUs with different prices. You’ll only make inventory management more complicated for your business.

Use Classes to Organize your Transactions6. Use Classes to Organize your Transactions

QuickBooks comes equipped with two simple categorizations to help you identify similar data – classes and types.

Classes are used to distinguish different kinds of transactions, whereas types are assigned to individual jobs, customers and vendors. You’ll want to use classes to organize transactions related to different places, departments or types of business. It will make it much easier to sort through your books later on.

Create Purchase Orders to Safeguard Business Deals7. Create Purchase Orders to Safeguard Business Deals

Purchase orders allow you to keep track of all of your orders with a specific vendor. We recommend always creating a purchase order (better known as a PO) each time you place an order with a supplier or a vendor. You should also create an additional document outlining your terms and conditions, as well as any other requirements (i.e. guidelines for defects).

The more information you provide on a PO, the safer you are from getting caught in a sticky situation with your vendor should anything go wrong. Your POs are essentially the prenups to your vendor and supplier relationships.

Remember to always include a start and end ship date and to state that you have the right to cancel the order if not delivered within the specified time frame.

Utilize Bills for Inventory Tracking & Terms8. Utilize Bills for Inventory Tracking & Terms

After you receive inventory from your supplier or vendor, you should account for it in your system.

The best way to do that is to create a bill that adjusts your inventory for you (unless if you have Enhanced Inventory Receiving turned on).

A bill also allows you to keep track of what you owe your vendors and suppliers. You can reference your bills to see which of your terms are up and then you’re ready to pay, send a payment to your vendor by creatinga payment entry in your system. Utilizing this process will ensure your books stay up to date and enable you to keep track of your terms and payment due dates.

Differentiate your Customers9. Differentiate your Customers

Too often, we encounter small business who don’t input different names for all of their customers, they’re simply labeled “customer.” This is a terrible practice because it completely handicaps you from being able to drill down into your customers to figure out who’s actually moving the needle for your business.

The ability to run detailed and granular reports only becomes more important as your business and sales grow.  Differentiating all of your customers and categorizing their orders appropriately is the way to go.

Utilize Payments10. Utilize Payments

Create a payment entry in your system whenever you send or receive a payment and apply it to the appropriate invoice or bill. Accounting is all about balance, so when using QuickBooks it’s key to maintain an equilibrium within the system by “accounting” for everything that happens from a transactional standpoint. Once you apply a payment to an invoice or bill, you can close them and complete that transaction.

The Bottom Line

Our QuickBooks recommendations come from the most common customer service issues we run into with our new customers. QuickBooks offers a wide range of features, so as a small businesses it’s hard to fully get a grasp of every functionality and how it’s actually beneficial to your business now and down the road.

Still, the best way to enhance and simplify the order process involves more than QuickBooks best practices. Order and inventory management apps like Lettuce make it unbelievably simple to manage your orders and save time processing them. You can easily sync with QuickBooks and conduct all of your important business functions in one simple, beautiful online application.

Nima Patel is a Growth Marketer at Lettuce, a simple inventory management tool made for e-commerce and wholesale. Her team writes about e-commerce, inventory management, and small business on the Lettuce blog. Say “hi” @nimapt.

P.S. Don’t forget to check out the integration between Shoeboxed and QuickBooks for an easy and painless way to enter your receipts into QuickBooks!

How to Make Taxes Easier Next Year

Use these practical steps to smooth your road to next year’s taxes. Pay attention to the calculations that gave you the greatest headache this year and break down the numbers that went into them. From there, look for ways to regularly track these numbers and applications that will automate the process.

Photo Credit:

This post is brought to you by Stitch Labs, providers of the must-have app for small businesses to manage inventory, orders, customers and more.

If you’re using Shoeboxed, you’ve already discovered how automating your receipt records can save you a lot of work at tax time. With that in mind, let’s look at another way to save you from extra stress and make taxes easier next year: good inventory management habits.

Step #1: Know what to track

Hindsight is 20/20 at tax time. It’s not uncommon to think, “If only I had kept track this one thing, I would not be up all night with my calculator.”

Avoid this sentiment and make sure to track these metrics:

  • Inventory levels – You need an accurate count of products on hand at all times, but this can get tricky if you sell across multiple sales channels. Consistency here tells you when to reorder and prevents lost cash flow due to overstocking or lost sales due to selling out.
  • Cost of goods sold (COGS)COGS is a necessary metric for completing taxes, but you should track the numbers that comprise it throughout the year. These include the costs of raw materials, along with direct labor costs used to produce the goods. It excludes indirect expenses (e.g. distribution and sales force costs). Tracking and organizing these costs year round will save you the headache of pulling them all together at year-end.
  • Works in progress – Counted separately from finished goods, works in progress include unfinished units that haven’t been sold yet or haven’t been promised to a customer.

Step #2: Automate your tracking

Embrace current technology that automates the process, to make it easier to keep track of the metrics you need to.

  • Commit to a system – While more than one inventory tracking system will work, you need to commit to one and make regular updates. Set a time at the start or end of your day to enter inventory data and do a quick check for accuracy.Early on, an Excel or Google spreadsheet can work well for tracking your data. Rows and columns are easy to add as you include new products or new inventory data. As you grow, transcribing data and product updates to a spreadsheet becomes time consuming. Here, an inventory management system like Stitch Labs can serve as a robust repository for your data and serve as a daily dashboard.
  • Integrate your data – Look for systems that allow you to integrate your sales channels as this will bring all your data into one place. Many people let sales numbers sit within each channel until they need to add them up. Don’t lose day-to-day visibility of your inventory and sales because your data is in disparate locations. Plus, it slows you down when you need to bring all your totals together, like when you do your taxes.This is another place where an inventory management system can make taxes easier next year. A system that integrates with multiple sales channels draws your sales numbers into one place and update your inventory automatically.This saves a lot of time in transcribing inventory and sales data into your own spreadsheet, plus it puts it in a format that’s easy to pass on to your accountant at tax time.
  • Go paperless – Collecting and tracking your data digitally makes it easy to find the exact record you need when you need it. As you automate, look for systems that allow you to make your data digital. Not only do paper documents consume space and take more time to organize, they aren’t searchable.Additionally, digital documents can be backed up online. This lessens the risk of losing important data, but also makes it easier to access and share with others you work with. For example, inventory tracking software will let you export your data to CSV format  so your accountant can use immediately.

Use these practical steps to make taxes easier next year. Pay attention to the calculations that gave you the greatest headache this year and break down the numbers that went into them. From there, look for ways to regularly track these numbers and applications that will automate the process.