Inventory Turns: The Real Key to Profit

Tracking inventory turns (the number of times a year you sell something and re-stock) is critical to making money. Inventory on the shelf costs you money just sitting there, and it is a total loss if it expires unsold. Getting products onto and off your shelves as fast as possible is where you make money. Two complete inventory turns a year would be good for a home-based business, three or four would be better.

However, the thought of putting every lipstick or candle and its purchase date into an inventory tracking program is probably enough to make you run screaming from the computer. Here's a simple color-coded tracking method I have used - unless you are colorblind, it works.

Supplies:

Small labels (I used Avery #05412, 5/16 x 1/2 in, in packs of 1,000). Highlighters in SIX colors that are easy to distinguish at a glance. You need one color for each month in your turnover cycle. You can also use colored dot labels if you want, as long as they are removable, but I found that the white labels are cheaper and you never run out of any color.

Make your date key: put the month and the color you will use for that month on a piece of paper that you will post next to your inventory. Let's assume you are using pink, blue, green, orange, violet, and yellow, in that order to do two turns a year.

Marking the Inventory:

Bring all your inventory into one place to mark it.

Don't worry about when you bought your current inventory. Everything you have at the start of the system gets the same date code. To start, scribble several sheets of the labels with the pink highlighter to color the dots. Put one pink dot on every product. Make sure you can see the dot easily when the product is stored.

While you are marking product, check the expiration dates. Set any product that is discontinued, damaged, expired, or less than 3 months from expiration to one side. Write down the cost of the damaged and expired product, then discard it. It goes on your tax return as a business loss for the year you discard it.

Put the product back, preferably all in one spot where you can see what you have without having to handle it.