Which system should I use to keep track of my inventory? Do I manage inventory in Excel?
Or do I go with inventory software? Let’s compare inventory in Excel with inventory
software. In a previous video, I built a simple spreadsheet
that helps track inventory. The basic idea, or inventory equation, is that for each accounting
period the opening inventory plus purchases (incoming stock) minus shipments (outgoing
stock) equals ending inventory. In order to build a spreadsheet like this, only a minimal
level of understanding of how to use Excel is needed. Straightforward Excel formulas
like VLOOKUP, SUMIF, and IFERROR help you standardize the spreadsheet, and gain some
efficiency. So where do I go from here? What is the next
step in my inventory system? I want to add more functionality! I could dive deeper into
Excel, use more advanced Excel formulas, and apply Visual Basic (VBA) to upgrade my inventory
spreadsheet. Or I could start using inventory software.
If I choose the route of diving deeper into Excel, I can use the existing license or subscription
to Microsoft Office that I already have. I will have to invest my own time and effort
to build a more advanced inventory management spreadsheet. It might seem that this time
and effort is “free”, but there is an opportunity cost involved here: I could be
using my time for other aspects of my business, like marketing, which could help me grow my
business faster. If I keep track of inventory in Excel, I will start with building the functionality
in my spreadsheet that I need most. For a small business that does its inventory management
mostly desktop-based, and with a single user, this could be the way to go.
If I go the route of enhancing my inventory system in Excel, I want to learn to build
transaction data entry screens, I want to build sales and margin tracking functionality,
and I want to build a robust purchasing spreadsheet to track my inventory on order and payments
to suppliers. But what if I reach the limit? The limit of
my Excel skills, or the limit of what Excel is capable of doing? I could be lacking the
technical skills to build an advanced inventory management spreadsheet in Excel, or get to
the level where my inventory management needs outgrow the level of spreadsheets. Switching
to inventory software might be the way to go!
If I choose to start using inventory software, like inFlow, I subscribe to a plan that fits
me based on things like my number of team members, number of inventory locations, and
number of sales orders by month. That gives me access to more than one hundred features
in the inventory software, plus built-in as well as custom reports. inFlow inventory software
is hosted securely in the cloud, and can be accessed from anywhere, from desktop or mobile,
by multiple users at the same time. If I have a larger team, I can set access rights by
user: some team members just need access to the sales orders, others to just purchase
orders, etcetera. The central question in deciding whether to
manage inventory in Excel, or use inventory software, is: what’s my core competence,
running spreadsheets or running a business? My friends at inFlow challenged me to give
their inventory software a go. Let’s load the same data (that I used when I built my
Excel inventory management spreadsheet) into the inFlow inventory software, and see whether
it works for me. I signed up for the free trial of inFlow,
the link is in the description below. Here are the main things I learned by trying out
inFlow inventory software. Making the switch from inventory in Excel
to inFlow inventory software is possible without having to re-enter all existing data manually,
as the inventory software allows you to import data through a CSV file, which is a plain
text file that contains a list of data. CSV means Comma Separated Values. In an Excel
workbook, go to File – Save As, and pick Save As CSV. On the inFlow side, import the
various types of data (like product details, vendors, and stock levels) into the right
fields in the inventory software. The inFlow team covers this in detail in a step-by-step
video tutorial. Let me walk you through the biggest benefits
of using inventory software, from my perspective. First and foremost, it focuses on running
a product-based business. This is the homepage of the inFlow inventory software. Inventory
is right in the middle. You can jump straight to the current stock overview, to see what
you have in stock and where. You can adjust stock levels, reorder stock, and add new products.
And if you run a small manufacturing operation, you can create workorders to manufacture finished
products from parts. Within the same inventory software, you can
issue a new order to buy more stock from your vendors, and view or update past purchase
orders. You can add vendors, or update the existing vendor list.
Those three menus (vendor, purchase order, inventory) take care of existing and incoming
inventory. Now here comes the most exciting part on the right: SELLING! Fulfilling new
sales orders, receiving payment on existing orders, adding new customers. All of that
in one inventory system, that automatically updates inventory as you buy and sell. The
inventory software acts as a live, single source of truth for your inventory. No need
to remember to update quantities. Professional inventory software gives you the ability to
focus on inventory levels as well as inventory flow at the same time.
Here’s my definition of inventory management: having the right inventory, at the right time,
in the right place. One of the worst things that can happen in a growing business, is
to have demand from customers, but lacking the stock to supply, thereby missing out on
revenue and margin opportunities. That’s why having a good grip on inventory availability
is key. The basic Excel inventory spreadsheet that I built does a bit of that, it reconciles
from opening inventory through purchases (in) and shipments (out) to ending inventory. inFlow
inventory software goes beyond that: in the inventory summary report, the quantity owned
is adjusted for the units that have been reserved by customer orders to provide a real-time
view on the quantity available for new customer orders. Add the quantity currently on order
from vendors, to get to the current anticipated quantity: what would be in stock if all sales
and purchases were completed now. That number is automatically compared to reorder points
that you set up in the system, to always stay on top of the inventory flow process. I chose
to get daily notifications by e-mail, every weekday at 3PM, of items where stock levels
are low, so I can take action the very same day!
Third benefit of using inventory software, versus tracking inventory in Excel, is the
practical tools that make running your inventory based business easier. inFlow gives you the
option to use showrooms: online product catalogs that you can share with your customers, allowing
them to see your currently stocked products, and even place orders online.
Generating and using barcodes in inFlow is also very easy. These can help you save time
and avoid errors. On the commercial side, inFlow inventory software
can integrate orders from other channels with Shopify, WooCommerce, SquareSpace, and Amazon.
These are two-way integrations: inFlow can push inventory levels to these platforms,
and pull new sales orders automatically. Simply add your store name, and click through the
setup wizard. On the accounting side, you have the option
to push only sales orders, only purchase orders (including inventory value), or both to QuickBooks
Online. Two-way or one-way integrations with other
platforms, something that I wouldn’t know how to even start building in Excel!
One of the key financial areas to focus on in a product based online business is working
capital management. inFlow inventory software makes that easy too: manage receivables with
the customer payment summary report, manage payables with the vendor payment details report,
manage inventory with various inventory reports like the inventory summary.
If you are wondering whether to keep managing inventory in Excel or make the switch to inventory
software, then I can recommend testing inventory software like inFlow. It could be what you
need to grow your business faster!