What inventory reports you need (and what they are telling you)

Editorial Team

7 min read
Man in a shop counting inventory

Your retail store’s inventory is one of your most valuable assets. Stocking the right products, in the right amount, and at the right time can make a big impact on your profit margin.

So, how do you know if you’re optimizing your inventory? Some merchants simply wait until an empty spot appears on the shelf. Others make notes during quarterly stock counts. But there’s a better way–and that’s inventory reporting. 

What are inventory reports?

Retail inventory reports provide detailed information about the merchandise you have on hand. These reports are tied to the products you receive and sell, giving you better visibility into how much potential profit you have in your store. That data can be used to track your store’s performance and identify areas to improve your inventory strategy. 

The benefits of inventory reporting

Your goal for inventory reporting is to gather insight so that you can manage your inventory more efficiently. By doing so, you will unlock new ways to maximize growth for your business. You’ll be able to:

  • Ensure you’re not leaving money on the table from stockouts and excess inventory. 
  • Better identify movement trends to make more informed decisions about your product assortment. 
  • Gather valuable insights into customer preferences to improve the overall customer experience.
  • Budget your purchases more accurately and spend money on products your customers actually want. 
  • Compare performance and product assortment across different storefront locations and channels. 
Woman counting inventory with pencil and paper

Types of businesses that need to report inventory

If you’re selling goods to customers you need to be tracking your inventory, whether that’s a pair of shoes, a latte, or handmade bracelets. However, the way you do that depends on your business. For example, a shoe store tracks the finished goods, while a coffee shop should track each component for the latte, and a local artist will want to track both the materials and finished products for their bracelets. 

Top 3 inventory reports you need (and what they’re telling you)

There are dozens of inventory reports you can run from tracking the change in your inventory to checking what products are set to expire and when. Based on your business, a handful of reports will be most important. These three inventory reports are a great starting point. 

1. Inventory valuation report

Your business’s inventory valuation report calculates the cost of goods held in the physical merchandise you have available. This calculates the total cost of the products you have on hand and the potential profit from selling them. It is also used to identify your ending inventory for taxes each year so that you can maximize your return. This report can help paint an accurate picture of your company’s financial health. 

What high inventory valuation means

A high inventory valuation indicates that your business has a large amount of merchandise available for purchase. While this shows that your business has enough product to meet demand, it can also mean you have poor cash flow or products that have been sitting on the shelf for too long. The profit tied up in this stock can’t be invested in other areas, like marketing material. When this happens, you may need to take out loans or increase your line of credit to cover other costs until the inventory is sold.

What low inventory valuation means

On the other hand, low inventory valuation means you don’t have a lot of products available. This could mean that you have your ordering strategy dialed in so that you always have just the right amount of product to meet demand. If not, you run the risk of turning shoppers to a competitor due to stockouts. Not only does that mean losing out on a sale, but it hurts your customer satisfaction. If you are not investing enough in stock to keep up with market trends, you likely aren’t maximizing your profits. 

Woman in store taking inventory on a tablet

2. Stock forecast report

Simplify re-ordering by knowing exactly what to order and when with a stock forecast report. This report takes into consideration your stock levels, costs, and trends in customer demand to calculate the estimated turnover for a given product. By looking at a stock forecast report, you can determine when you need to order more products to keep up with the market.

What a short selling period means

If a product has a short selling period, or a high turnover rate, that means you are likely not holding enough product to meet demand and run the risk of stockouts. Placing more orders with smaller quantities to keep up can result in higher delivery and handling expenses. Consider adjusting your reorder levels for these high-demand products.

What a long selling period means

Products with a longer selling period mean the product has a slow turnover rate. While this should not necessarily be a concern for expensive products that require more consideration, it may indicate a lack of product-market fit. In this case, talk to your shoppers and ask if your products are meeting their expectations. If not, it’s time to rethink your product assortment or consider whether your marketing strategy is reaching the right audience. 

3. Dead inventory report

Products that are gathering dust on your shelves are not doing their intended job of driving profit. A dead inventory report brings these products to light. By staying on top of slow-moving products, you can make an informed decision about how to best move out the product and make room for more profitable inventory investments. 

What a low number of days since the last sale means

Maybe metallic scarves were a short-lived trend, or you discovered a new product that is not getting the organic traction you anticipated. If you have a recent addition to your dead inventory report, take action quickly. Perhaps it wasn’t marketed well and could use a display or listing refresh. Running sales or promotions on the product is another way to drive awareness, move products, and even initiate adoption. 

What a high number of days since the last sale means

Once you’ve tried different marketing and pricing strategies and the product is still sitting on your report, it’s time for some more drastic tactics. Consider reaching out to your vendor for a refund or credit. If that is not an option, look online for marketplaces or liquidators you can pass your product off to. The quickest way to free up dead inventory is by recycling or donating. You won’t make a profit, however you’ll be able to invest in more successful products that generate sales. 

Women scanning box with barcode scanner and woman working on a laptop

Automate inventory reporting

Real-time inventory reporting is essential to integrating key data points into your day-to-day retail strategy. While most POS platforms offer a basic level of reporting, consider an inventory management and reporting tool that provides the powerful inventory insights you’re missing. An inventory management system, like Thrive, pulls up-to-date data everywhere you sell, so your team spends less time on complicated spreadsheets and more time growing the business. 

Let your inventory reports guide you

As a small business owner, you have a lot on your plate. That’s why inventory reporting is a valuable tool for your business. By listening to the insights your inventory reports are telling you, you’ll be able to take control of your business and drive growth with confidence. 

Learn more about managing your inventory with Thrive Inventory by Shopventory here.

This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.

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