Any business that holds inventory can understand the challenge of keeping track of the goods it has in stock — and the more items it stocks, the harder that can be without an inventory list that details what the company has in its possession. An inventory list also advises when to replenish products, when products are hanging around too long and other factors that can affect the company’s carrying costs and overall financials. Like so many other business processes that benefit from real-time data and automation, so, too, do the activities associated with managing and maintaining inventory lists.
What Is an Inventory List?
An inventory list provides an organized summary of every product a business has in stock, such as raw materials, components, works in progress and finished goods. It typically includes each item’s SKU number, name, description, unit cost, quantity in stock and reorder point. An inventory list is an important tool for tracking inventory performance and turnover, as well as for demand forecasting.
- An inventory list includes item details, such as the SKU, name, description, unit cost and quantity.
- Inventory management tools and automation help improve accuracy, stock control and profitability, compared to manual methods.
- Maintaining accurate inventory lists is important for income tax reporting because businesses need to record their end-of-year inventory correctly in order to file taxes.
Inventory Lists Explained
An inventory list helps a company stay on top, and in control, of every item it has available. Not only does an inventory list track physical counts but, at a higher level, it helps businesses make informed decisions about purchasing, production and sales.
The most useful inventory lists provide a real-time view of what a business has on hand, measure the efficiency of inventory turnover and pinpoint slow-moving or obsolete items. By tracking which inventory is not being used or sold, the business can decide to sell, mark down or write off stale inventory to reduce carrying costs, such as warehouse storage fees, insurance, and employee costs to handle and manage the inventory. Accurate inventory lists are also useful for tax-reporting purposes.
Why Inventory Lists Are Important
Inventory lists provide a clear picture of what a business has in stock, how efficiently it is turning over inventory, whether it’s running low on an item and needs to restock and, conversely, whether it has too much on hand and needs to execute a way to reduce the amount, such as by offering a discount. An inventory list helps ensure that the right amounts of products are available when customers need them, so as not to lose them to competitors. This can also improve cash flow, sales revenue and profitability. If a business’s inventory list is out of date or inaccurate, the business risks running out of inventory (stockout), accumulating inventory that isn’t selling (dead stock), higher carrying costs and loss due to shrinkage.
Additionally, inventory lists help businesses make informed decisions about purchasing and production, which can lead to greater profitability.
What to Include on Inventory Lists
How much information to include on an inventory list depends on the individual business, its industry, how much inventory it has and its method of recording. Consider capturing at least the following details, keeping in mind that products with variations — such as size, color, make and model — should be accounted for individually.
- Name of the item.
- SKU (stock-keeping unit), serial number and/or barcode that identifies an item.
- Category and/or brief item description.
- Name of manufacturer or supplier.
- Unit cost.
- Sale price.
- Quantity in stock.
- Total value.
- Reorder point, triggered by having the minimum quantity of the item in stock.
- Days per reorder.
How to Create an Inventory List
The usefulness of inventory lists dates back thousands of years, according to archeologist Gunter Dreyer, who believed that writing developed out of early marks used to count the kinds and amounts of goods stocked at ancient warehouses. These days, businesses typically rely on one of three different methods to create an inventory list:
Manual Inventory Lists
To create an inventory list manually, an inventory manager has to physically count each item in stock and record the information on a form or template they create or download. For the most accurate results, the list will need to be updated to keep pace with how often inventory levels change. The more items a business carries, the more time-consuming and error-prone this method can be.
Excel, Google Sheets and others spreadsheet programs are the next step up from manual inventory lists. But that’s not to say they don’t require manual data entry, because they most certainly do, including creating columns for all the information to be tracked, adding rows for each product in stock, filling in their pertinent data and programming behind-the-scenes formulas so that an update to one field recalculates another. Inventory list templates can be downloaded from the web so a business doesn’t have to start entirely from scratch.
Inventory Management Tools
Manual inventory lists and spreadsheets are rarely sustainable for businesses that have growing volumes of inventory and/or multiple locations and sales channels. That job is best handled with inventory management software that can automatically create and update inventory lists in real time and with the highest degree of accuracy. This “magic” is achieved via integration with barcode scanners, radio-frequency identification (RFID) tags, point-of-sales (POS) systems and other forms of “smart” devices that communicate the movement of inventory. Inventory management systems can also automate inventory counting, send automatic notifications when stock levels are nearing their reorder points and automatically generate reports.
9 Reasons to Automate an Inventory List
Growing businesses, such as those in the retail sector, that have multiple locations or manufacture many raw materials to create finished products, can benefit from an automated inventory list. Here are some solid reasons why a business should consider using an automated inventory list:
- Save time and effort: Automating an inventory list significantly reduces or eliminates the need for time-consuming, labor-intensive manual data entry and calculations, as well as list-updating and product-tracking.
- Increase accuracy and visibility: Manual processes are prone to error — think of the consequences of a simple mistype of 15 items in stock when it really should be 150. An automated inventory list provides an accurate, real-time representation of what a business has in stock, which is particularly important when handling large volumes of inventory across multiple locations.
- Stay in control of stock: The more accurate an inventory list, the better able a business will be to retain control of its stock, because it knows exactly what it has on hand, when it’s time to replenish and when it’s time to cast off items that aren’t selling. This also makes for a well-oiled supply chain.
- Improve inventory turnover: Inventory turnover is measured as the length of time that elapses between when an item first comes into a business’s possession until the moment it is purchased. An automated inventory list provides real-time inventory performance data, enabling businesses to become more efficient by, for example, identifying slow-moving or surplus stock that could use a form of incentive to be sold. Conversely, fast-selling items can be replenished more quickly.
- Lower carrying costs: Unsold inventory not only represents unrealized sales revenue, but it also costs the business in terms of storage, taxes and insurance. An automated inventory list can help contain these so-called carrying costs by tracking and flagging slow-moving products.
- Better data analysis and reporting: The more a business can understand what’s going on with its inventory, the better positioned it will be to make the right inventory-related decisions. An automated inventory list not only provides that information, it also ensures its accuracy and timeliness.
- Inform forecasting and budgeting: The past and present are often good predictors for the future. In terms of inventory, the precise, real-time data found on an automated inventory list can help businesses plan for anticipated customer demand and estimate how much and what kind of resources they’ll need to purchase those goods.
- Ease tax preparation: The amount of inventory a business has remaining at the end of an accounting period affects its cost of goods sold (COGS), which, along with the company’s inventory methodology, impacts its gross profit and gross margin and ultimately factors into how much it owes in taxes. COGS appears as a line item on the company’s income statement, following revenue. Automated inventory lists ensure that the accounting team is working with the most accurate information.
- Boost revenue and profitability: All of the preceding benefits can lead to the ultimate benefit of them all: increases in the business’s top and bottom lines. And it all begins with an accurate inventory list.
Inventory List Examples
Digital or physical, an inventory list is a living, breathing document that requires constant care for the highest level of reliability — and the more automated its upkeep, the more accurate the list. As mentioned earlier, inventory comes in many forms, including raw materials and components, works in progress and finished goods ready for sale. At its simplest, an inventory list is formatted as a grid; each row contains a single item and its details, which are specified by the columns. Column labels typically include an item’s name, its SKU, its unit price and quantity in stock. More advanced lists, usually the domain of automated software, are especially useful for businesses with many different types and variations of inventory.
As an example, let’s think about a basic inventory list for a hypothetical toy store named Fun ’n’ Games. The list contains all of the games it stocks on premises. Each game has a unique SKU, even for variations of the same game, such as Monopoly and Monopoly Junior. Also included on the list: the game’s name, its maker (for example, Hasbro), its unit price (how much the game cost the store to purchase), how much the store charges customers for the game, how many games are in stock, value of the inventory (unit price times quantity), when it’s time to reorder and, finally, the time it takes for a reorder to be received.
What happens to the list if Fun ’n’ Games has five stores and an offsite warehouse to which games are allocated? Each store and the warehouse, theoretically, could maintain its own inventory list, but without the big-picture view of how much inventory exists at each location, which only software can provide, it’s easy to see how difficult inventory management would quickly become.
Free Inventory List Template
An inventory list is a critical tool for tracking inventory. Businesses can create their own templates or download a version that best matches their needs. Inventory management software also provides this functionality at a more detailed, and automated, level.
Optimize Inventory Levels and Boost Profitability With NetSuite
Creating and managing inventory lists can be a time-consuming and complex task, especially when handled manually. In addition, the lists may not necessarily be up to date at any given moment. So how can a business be sure of how much exact inventory is in stock or when items need to be reordered? After all, the last thing it wants to do is disappoint a customer by not having a product in stock and end up losing the sale. NetSuite Inventory Management is the answer. The solution accurately tracks inventory levels across multiple locations and sales channels for companywide visibility; automatically updates inventory lists when items are sold, received or returned; and generates alerts when stock needs to be replenished. It also provides real-time inventory reports and analytics, enabling businesses to make data-driven decisions in the moment and to use the data for forecasting and budgeting purposes.
A well-maintained inventory list helps businesses track inventory levels, monitor stock movement and decide when to reorder inventory or reduce on-hand quantity. Accurate record-keeping is paramount — a job best performed by software that automates the process in real time and eliminates all the mistakes that can occur when handled manually. By optimizing inventory levels with software, businesses can keep their most in-demand items in stock, reduce costs associated with overordering and storage, and more, and also increase their revenue and profit.
Inventory List FAQs
What is an inventory list for?
A business uses an inventory list to keep track of items, such as products for sale and raw materials. The inventory list also reflects what items are available and ready for sale or use, and when certain items are running low.
What are inventory list best practices?
One best practice is to automate inventory lists so they’re updated in real time when an item is used or sold. That means ditching paper, pens and spreadsheets in favor of inventory management software that improves overall efficiency and data accuracy.
Can I use Excel for my inventory lists?
Yes, Excel can be used to create an inventory list and generate templates for future use. But Excel, or any other spreadsheet program, still requires people to manually enter and update data, which leaves this method prone to error.
What is the best tool for managing inventory lists?
The best tool for managing inventory lists is inventory management software that automates much of the process in real time. Businesses first starting out or those that carry minimal inventory may use a spreadsheet for their lists, but that method will likely become impractical as they grow.
How do I make an inventory list?
An inventory list is a detailed record of items or goods held in stock by a business. It can be created manually, using a spreadsheet or with inventory management software.
Why is an inventory list important?
An inventory list is important because it tells a business exactly what products or items are available in stock for use or sale, what to reorder, what to scale back and other details that can help cut down on expenses and even boost revenue.
How do I make an inventory list in Excel?
In its most basic form, each Excel row corresponds to a specific item and its relevant information, which is organized into columns. Premade templates can be found online.
Does Word have an inventory template?
Multicolumn tables can be created in Word. There is also a function to create an Excel spreadsheet and “Quick Tables” within the Word document.