Best Practices for Tracking Inventory and the Top 3 Factors When Choosing an Accounting Software
Managing inventory is a critical part of running a successful business. Whether you’re a retail store, an e-commerce business, or a company that sells physical products, how you track and manage inventory directly affects your bottom line. Poor inventory practices can lead to overstocking, stockouts, wasted capital, and even frustrated customers. On the other hand, effective inventory tracking can improve cash flow, support better decision-making, and keep your operations running smoothly.
In this blog, we’ll break down best practices for tracking inventory and explore the top three factors to consider when choosing an accounting software that will support your business growth.
Why Inventory Tracking Matters
Inventory is often one of the largest investments for a business. Failing to monitor it carefully can lead to problems like:
Cash tied up in unsold products
Increased risk of spoilage or obsolescence
Difficulty fulfilling orders
Missed sales opportunities
Errors in financial reporting
Accurate inventory tracking ensures you know what you have, what you need, and what products contribute most to your profitability.
Best Practices for Tracking Inventory
1. Implement a Consistent Inventory Management System
Consistency is key. Use the same system across your business — whether manual spreadsheets, inventory-specific software, or integrated accounting systems like QuickBooks Online Plus. This ensures all team members follow the same process and data remains reliable.
2. Use the Right Valuation Method
Choose the inventory valuation method that best fits your business and tax strategy. Common methods include:
FIFO (First-In, First-Out): Oldest items sold first, often aligning with actual flow of goods.
LIFO (Last-In, First-Out): Newest items sold first, beneficial during inflation for lowering taxable income.
Weighted Average: Smooths out price fluctuations.
Your choice impacts both your financial statements and your taxes.
3. Leverage Technology for Real-Time Tracking
Cloud-based systems like QuickBooks Online Plus or other inventory management tools integrate with your sales channels and automatically update stock levels. Real-time data reduces manual errors and prevents costly surprises.
4. Conduct Regular Audits
Even with technology, mistakes happen. Perform periodic physical counts to verify actual stock matches your system. Consider cycle counting, where small portions of inventory are checked regularly rather than all at once.
5. Track Inventory KPIs
Monitor key performance indicators (KPIs) such as:
Inventory turnover ratio
Days sales of inventory (DSI)
Gross margin return on investment (GMROI)
These metrics help identify whether you’re carrying too much or too little stock.
6. Classify Your Inventory (ABC Analysis)
Segment your products into categories:
A: High-value, low-quantity items
B: Mid-range items
C: Low-value, high-quantity items
This helps prioritize which items need the most monitoring and control.
7. Forecast Demand Accurately
Use sales history, seasonal trends, and market data to forecast future demand. Accurate forecasting reduces the risk of overstocking or stockouts.
Top 3 Factors When Choosing an Accounting Software
Inventory tracking is closely tied to your accounting system, so the right software is essential. Here are the top three factors to consider:
1. Inventory Management Features
Not all accounting software includes inventory tools. Look for features like:
Real-time stock tracking
Reorder alerts
Integration with point-of-sale (POS) or e-commerce platforms
Inventory reporting and profitability analysis
For example, QuickBooks Online Essentials doesn’t include inventory, but QuickBooks Online Plus does. Choosing the right plan makes a big difference.
2. Scalability and Integrations
Your software should grow with your business. If you expand into new sales channels or add new product lines, you’ll want an accounting solution that can integrate with:
POS systems
E-commerce platforms (Shopify, Amazon, etc.)
Third-party apps for inventory forecasting and shipping
This ensures your accounting software remains a central hub rather than a bottleneck.
3. Ease of Use and Support
Even the most powerful software is useless if your team can’t use it effectively. Choose an option that:
Has an intuitive interface
Provides strong training resources
Offers responsive customer support
Cloud-based platforms are often easier to use and keep your financial data accessible anywhere.
Q&A: Inventory Tracking and Accounting Software
Q: How often should I update my inventory records?
A: Ideally, inventory should update in real-time through integrated systems. If that’s not possible, daily or weekly updates are the minimum to stay accurate.
Q: Do I need QBO Plus if I sell products?
A: Yes, if you manage inventory. Essentials doesn’t include inventory tracking, while Plus offers the tools you need.
Q: What happens if my physical count doesn’t match my records?
A: Investigate discrepancies right away. They may indicate theft, damage, or data entry errors. Adjust your books accordingly.
Q: Can inventory tracking help with cash flow management?
A: Absolutely. By avoiding overstocking, you free up capital for other uses, and accurate tracking helps plan purchasing around actual demand.
Q: Should I use a separate inventory system or rely on my accounting software?
A: Small to mid-sized businesses often do well with integrated accounting and inventory systems. Larger or more complex businesses may benefit from dedicated inventory software that syncs with their accounting system.
How Brecken Business Solutions Can Help
At Brecken Business Solutions, we help businesses set up smarter inventory and accounting processes. Whether you’re choosing between QBO Essentials and Plus, need help cleaning up your financials, or want to implement best practices for inventory management, our team provides tailored solutions to support your growth.
Call to Action
Contact us today to ensure your inventory and accounting systems work together seamlessly—and start making smarter business decisions.
