Keeping track of inventory is definitely not one of the most enjoyable parts of running a product business. It requires hard manual work (lifting, moving, counting), paperwork and a whole lot of time spent behind a computer. The good news is that once you finally do establish your inventory tracking system, your business will become much more efficient. You will be able to track trends in sales and returns, you'll know when is the ideal time to order or manufacture more products, and you will be able to put together your year-end financial statements and summaries more quickly.

Step 1.

Count your products to determine the starting inventory. Once you have your final figures, categorize your inventory first by product name, then by the other specific attributes of the products such as color, size, date or style. For example, if you hold embroidered T-shirts as inventory, you'll want to categorize them by the message on the T-shirt, then by color, then by size. This makes it easier for you to track and find the inventory you need.

Step 2.

Create a spreadsheet in Microsoft Excel to track inventory if you have fewer than 10 types of products in inventory. Create a new worksheet for each product and start off by listing the initial inventory count. From that point on subtract all sales of each product that go out according to your register information on a weekly basis. Add new inventory as it arrives. Adjust the inventory total when there are product returns. Be sure to include the date next to each entry.

Step 3.

If you have more than 10 types of products to inventory, consider setting up an inventory database in Microsoft Access instead (see Resources for a link to a templates you can use). The Microsoft Access database inventory templates are more attractive, automated and easy to use. It also allows you to print convenient inventory reports to track sales, inventory additions and returns.

Step 4.

If you are a store retailer who sells many different items, purchase professional inventory management software to integrate with a barcode scanner and the register(s) in your store. This will be costly, but worth the expense since it will become overwhelming and time consuming to manually update a database with that many items to track (see Resources for an inventory tracking software suggestion). If you are a wholesaler, distributor or manufacturer who works only with invoices (no direct sales to customers), you can also keep track of your inventory using your invoice paperwork.

Step 5.

If you are a store retailer do a manual inventory check at least once a year to assure that the inventory on paper matches the inventory in the store. Because of shrinkage (theft), the numbers can be drastically different if a regular inventory check isn't conducted. Change the numbers on your computer system to reflect shrinkage.


If you have a very large store, you can hire a third-party company to come and do your manual inventory check. They will usually do their work after the store closes and into the night. While shrinkage is definitely problem for any business, the amount you lose can be written off, providing you with a future tax benefit. This is another reason why it is so important to do a regular manual inventory check when you operate a retail business.