How to keep track of inventory in a small business

The key facts

• The method is five steps: one list, one movements log, derived quantities, a monthly count, one owner. Tools change; the method does not.
• The one rule that separates working records from fiction: record movements, never edit totals.
• The free route is real: a spreadsheet or Sheets build genuinely covers one person at moderate volume.
• The upgrade trigger: two people needing the truth at once, or a quantity nobody can explain. BSimple ($180/mo AUD up, trial) is the stage beyond.

Step 1 and 2: one list, one movements log

The list: every sellable item with a SKU, description, supplier, cost and par level — one row each, edited deliberately. If items lack SKUs, assign them now; everything downstream depends on a code that names exactly one thing. Kits and boxes get decided once (a box of ten is either one item or ten — pick, and stay consistent).

The log: one row per movement — date, SKU, direction (in/out), quantity, reason (received, sold, adjustment), who. This is the heart of the method: stock changes only through log entries, never by editing a quantity directly. It feels slower on day one and saves the business by month three, because every discrepancy becomes traceable to a moment, a person and a reason. The Excel build and the Sheets version implement the log properly.

Steps 3, 4 and 5: derive, count, own

Derive quantities. On-hand equals the sum of log entries — by formula, not by memory. A quantity that can be typed over is a quantity that will be typed over, usually during the busy week when accuracy matters most.

Count monthly. A real count against the record, variances investigated before adjusting, corrections entered as log entries with reasons. Twenty minutes a month beats a two-day year-end excavation, and it is the only way the record stays connected to the shelf. The counting discipline formalises it.

One owner. One named person answers for the record — not the only person who touches it, but the one who notices when entries stop arriving. Records die of neglect, not of software choice.

When the method needs software instead of a spreadsheet

The method scales until sharing does: the moment two people need quantities to be true at the same moment, a file becomes a rumour. Scanning is the second trigger — a scanner types into a system, but there is nothing at the shelf for it to type into. The third is reorder decisions: when "what should we buy?" is answered by scanning the log manually every week, the log is ready to start doing that work itself. The stage-by-stage path and the tracking-software comparison cover the tooling decision.

We build BSimple, so weigh that: it is the method above automated — one live record, guardrails on bad entries, scan-to-record, reorder drafts from par levels, invoices pushed to Xero or MYOB (US integrations rolling out). From $180/$250/$399 per month AUD, and the trial runs it on your actual products — the method transfers in an afternoon.