Inventory Reporting 101: A Retailer's Guide to Reporting on Inventory

Inventory reporting

Inventory is your biggest asset as a retailer. 

If you have incorrect stock counts, products that have been sitting on the shelves for months, or vendors who are underperforming, you are losing money. 

In the United States, retailers hold $1.35 worth of inventory for every dollar of sales. That’s too much investment not to monitor and optimize it for higher profits.

A good inventory report can help you do that. Inventory reports can help you improve inventory accuracy, meet demand more effectively, and reduce stockouts: the perfect blend for keeping customers satisfied and loyal.

To improve inventory management in your store, this guide explains the different types of inventory reports you can gather and how to create and use your own reports. 

What is an inventory report?

An inventory report is an organized summary of how much inventory you have at a given time. Reports are either electronic or physical, and show details including how much product you can sell now, inventory in transit, and what inventory you need. 

Importance of inventory reporting

  • Inventory tracking
  • Categorizing inventory
  • Improved forecasting
  • Better customer service

Inventory reporting is important for a variety of reasons that impact your business. Let's look at each of these areas individually. 

Inventory tracking

Inconsistent inventory tracking leads to double-handling of products and lost inventory. With an effective inventory reporting system, you can track the location of products throughout your retail supply chain, from your warehouse to the shelves in your store. 

Keeping track of inventory also helps you:

  • Maintain updated stock levels
  • Improve inventory accuracy
  • Understand inventory valuation and carrying costs 
  • Avoid stock shortages 

With an inventory report, you can also catch errors faster and maintain profitability. While there are some standalone inventory tracking systems, most are part of your inventory management software. Shopify merchants can use Shopify POS to keep track of both online and offline inventory, so customers can always find the products they are looking for. 

When selling numerous small items, it's difficult to keep track of what's available and how much of it. Having a system that does inventory for you allows you to focus on the more creative parts of running a business.


Manage your inventory with confidence

Only Shopify POS helps you manage warehouse and retail store inventory from the same back office. Compare inventory costs to revenue, see which items are selling out or sitting on shelves, forecast demand, and more.


Categorizing inventory

There are two popular ways retailers categorize inventory: by ABC analysis and by location or type. Regardless of which method you use, an inventory report is critical to categorizing your inventory. 

A report will show you in real time where inventory is throughout the supply chain, from raw materials to ready-to-sell. Knowing where products are helps you understand the cost of goods sold during each phase. It also helps you optimize inventory management and meet the future demands of customers. 

By categorizing products based on their value and usage, you have greater insight into what slow-moving products you're losing money from, so you can discount them and make room for more profitable products.

Read more: How to Run an ABC Analysis: Find Your Top (and Worst) Performing Inventory

Improved forecasting

In inventory forecasting, also called demand planning, past data and trends are used to predict future inventory requirements. With an inventory report, you can strategically manage stock items, avoid overstocking, and ensure you have enough stock to fulfill customers’ orders. 

Carry too little inventory, and you risk turning away customers ready to give you money. Too much inventory and your stockroom becomes a mess, increasing storage costs and overwhelming customers on the floor. 

Good inventory reporting can help you met changes in demand and stock the right amount of inventory in your store. 

Shopify’s reports give us really good data on what sells, which helps us know what to produce more of and set inventory thresholds we need to maintain to support demand.

Dustin Kroft, Principal and Lead Designer at Kroft

Learn more: Demand Planning for Retailers: How to Prepare for an Influx of New Shoppers

💡 PRO TIP: Shopify POS comes with tools to help you control and manage your inventory across multiple store locations, your online store, and warehouse. Forecast demand, set low-stock alerts, create purchase orders, know which items are selling or sitting on shelves, count inventory, and more.

Better customer service

Having enough inventory on hand doesn’t just benefit retailers’ pockets, it also improves customer satisfaction and loyalty. 

Imagine going into a store with an item in mind, only to find out it’s out of stock. Stock shortages are frustrating for customers. Some 37% of consumers who experience a stockout will shop with another brand, and 9% will buy nothing at all.

Accurate inventory reporting will tell you exactly when to order more stock, so you can keep more products on the shelves and keep customers happy.

Inventory control is the lifeblood of your store operations. The ability to monitor and predict your inventory helps the stores visually in being adequately stocked, which impacts your revenues and store appeal.

Types of inventory reporting

  • Inventory on hand
  • Shrinkage
  • Inventory valuation
  • Cost of goods sold
  • Stock reorders

Let's walk through each of these reports.

Inventory on hand

An inventory-on-hand report shows you the exact amount of stock available and its value. It indicates how much capital is in inventory, so you can better forecast, reorder, and budget for the future. 

💡 PRO TIP: When you use different platforms to run your online and retail stores, inventory discrepancies are more likely to happen. This can lead to more frequent inventory counts to reconcile differences and ensure stock levels are accurate.

Shrinkage

Inventory shrinkage is a term used to describe what has happened when your store has fewer items in stock than recorded. The 2020 National Retail Security Survey found that shrinkage accounts for 1.62% of a retailer’s bottom line, costing the industry $61.7 billion yearly. Shrink reports monitor shrinkage rates over time to see if you need to address any major problems.

Inventory performance

Inventory performance reports tell you specifics about your product sales, such as:

  • Best sellers
  • Worst sellers
  • Best year-over-year growth 

You can use this information to plan reordering raw materials or replenishment stock. If an in-demand product is selling like crazy, you can order more. 

An inventory performance report also reveals sales trends. If you notice a specific item hasn’t sold in a while, for example, you can dig deeper to understand why. 

💡 PRO TIP: Want to know which products account for the majority of profits? View the ABC inventory analysis report in Shopify admin to see your best and worst-performing inventory and choose which products to include in your next purchase order.

Inventory valuation

Your warehouse is full of products waiting to be sold. These items are stock you’ve spent money and resources on to acquire, and being in your inventory, they have value. Your inventory valuation report reflects the total cost of inventory and its potential profits per sale. 

With this report, you can:

  • Determine revenue goals 
  • Save on taxes 
  • Get small business financing 

The goal is to give you a clear picture of your business’s financial position and profitability. Costing your inventory can seem confusing, but there are methods you can use to value inventory and keep your books accurate. 

Learn more: 4 Inventory Valuation Methods for Retailers (+ How to Choose One)

Cost of goods sold

A business's cost of goods sold (COGS) is the direct cost of producing the products it sells. This is also called the "cost of sales," or "COGS report," as it includes the costs of materials and labor directly related to retail product production.

COGS reports deliver insights that help you:

  • Set the best price for products 
  • Manage quarterly taxes 
  • Find opportunities for growth

Overall, knowing your COGS helps paint a clear picture of your financial health and can help you optimize inventory management

Read more: What is Cost of Goods Sold (COGS) and How Can I Calculate It?

Stock reorders

Stock reorder reports show all product variants that match or have fallen below the reorder point. There is a listing of all products on hand, pending purchase orders, sales orders, and a variant's reorder level. Based on the amount of stock in hand and to be delivered, you can determine how much stock needs to be reordered. 

How to create an inventory report

  1. Build inventory list
  2. Establish a timeframe
  3. Choose a report to run
  4. Run your report

There are two ways to do inventory reporting: with an inventory management system or manually. 

A manual inventory reporting process helps you understand your inventory counts at one point in time. An inventory management system will keep track of inventory in real time, making adjustments as you buy and sell items. 

Using an inventory management system or Shopify’s POS system, you can speed up the inventory reporting process and avoid human errors. You can also sync all your systems together and run more efficiently. 

1. Build inventory list

Start by listing out every item in your inventory in a vertical column. Export this inventory data from your POS system or inventory management system. It will have information you need like:

  • Available stock
  • Location of stock
  • Variants available 
  • SKU numbers
  • Price
  • Number of units

Write inventory descriptions

Leave space for each product's description in another column. You can keep track of differences between inventory items this way. If you want to highlight a product's unique characteristics, for example, you can provide more detail. You can also note if an item is damaged or missing.

Include inventory price

Each item should have a price so you can easily figure out how much your inventory is worth. In some businesses, you may track purchase or manufacturing costs separately from the selling price.

2. Establish a timeframe

Make sure you retrieve all the data from the same timeframe. You can look at inventory reporting metrics by quarter or by day. When you're comparing periods, keep seasonal shopping trends in mind. If you look at April numbers compared to November, for example, you'll see a big discrepancy because of the holidays.

3. Choose a report to run

Once you have your data and date ranges, choose the report you want to run. You should choose a report that answers the question you want to answer. 

For example, an inventory performance report can help you understand changes in the best and worst-performing products. Shrinkage reports can help uncover changes in shrinkage. POS systems will also offer standard inventory reports you can use to begin your analysis.

4. Run your report

Last but not least, run the numbers and analyze. Look for positive and negative inventory and sales trends in your reports. For example, if you see a new product is selling quickly, you’ll want to set higher reorder points than you do for products that sell more slowly. 

How often do you need inventory reports?

Reporting frequency depends on your needs. You should run reports more often if you have a high volume store, since your numbers change frequently.

In any case, getting into the habit of running inventory reports is important for any size retailer. Some common periods to run inventory reports are:

  • Weekly and monthly. It’s easy to pull weekly and monthly reports from your POS system and inventory management software. Weekly and monthly reports can give you a regular look at your inventory health, set inventory thresholds to meet demand, and even inform marketing teams on how a promotion went. 
  • Before and after busy seasons. Real-time sales reports are a big win for retailers. But understanding period-over-period growth is critical to maximizing sales. For example, you’ll want to run inventory reports to compare Black Friday Cyber Monday (BCFM) 2020 to BFCM 2021. You can run reports during other busy seasons like back-to-school shopping or Valentine’s Day. 
  • Depending on your operations. For stores with high volumes of daily or hourly orders, more reporting will be needed to inform purchasing decisions. The goal is to find the right balance for your store to keep customers happy and your store profitable.  

Inventory reporting tips

Follow these tips to create useful inventory reports for your store.

Keep an organized stockroom

Stockrooms hold the vast bulk of the inventory in your store. It's an important area in your store, but customers never see it. When your stockroom is a complete mess, you'll likely experience inaccurate inventory counts and inefficiencies in your store, which will negatively affect your customers and your sales and profitability.

An organized stockroom helps you:

  • Quickly find shopper requests 
  • Run efficient inventory counts 
  • Easily restock inventory 
  • Avoid stockouts

Organizing your stockroom seems hard at first. But there are many stockroom layout examples you can experiment with in your store. Retailers will also make tweaks like keeping their best sellers in front of the stockroom and investing in inventory management tools to improve efficiencies. 

Stockroom layout example

Stockrooms are active places with a lot of moving parts. To get your stockroom right, read Get Organized: How to Arrange Your Retail Stockroom to Find Inventory Fast on the Shopify Retail blog.

Where possible, we would advise others to lean on technology such as inventory management systems to make your life easier. It also reduces the chances of human error, which prove fairly high when warehouse operatives are bored or disinterested.

Dhiresh Modi, Founder and Owner of SocksMad

Hire an inventory specialist

You wear enough hats as a retail business owner: accounting, sales, human resources, marketing. Hiring an inventory reporting specialist can take inventory reporting off your to-do list. 

A specialist in inventory management keeps track of all your inventory, ensuring your products are in great condition and ready to sell. They also make sure your inventory records are accurate and that you always have enough stock on hand. 

Some skills to look for when hiring an inventory specialist are:

  • Record-keeping abilities
  • Strong organizational skills
  • Good interpersonal skills
  • Basic computer skills

Hiring an inventory specialist can help keep your business profitable. For help finding and hiring one, read Inventory Specialist: Benefits, Responsibilities, Skills, Types, and Tips for Hiring.

💡 PRO TIP: Want to control which staff can count, receive, and adjust inventory quantities? Set roles and permissions to set boundaries on what staff can and can’t do when logged in to your POS system, like accessing its inventory management tools.

Audit inventory regularly

Inventory audits compare your actual inventory levels with your financial records. They also help make sure your inventory system matches your physical inventory.

Inventory records can be off for many reasons, and the only way to spot errors is to audit them regularly. Internal audits can be done on your own or at the request of an outside auditor. It's also possible to hire a third-party company to manage your inventory.

Regular audits help identify shrinkage and ensure inventory accuracy. They reduce the likelihood of ending up with phantom inventory and make reconciling your records easier.

Read more: A Simple Guide to Inventory Audits for Retailers

Manage inventory reporting at your store

There is no doubt that inventory reports are essential for the success of any retail or ecommerce store. Low-volume small stores can get away with manual inventory reporting. To maintain accuracy in reports, they can monitor stock levels and update them often enough in an Excel spreadsheet. 

However, you'll need a POS system that can grow with your business if you want to scale. POS inventory reports provide an overview of inventory performance, location, shrinkage, valuation, and more. You'll be able to easily determine and automate what products to order, what promotions to run, and how to keep your company profitable (and your customers happy).

Unify your inventory management with Shopify

Only Shopify POS helps you manage warehouse and retail store inventory from the same back office. Shopify automatically syncs stock quantities as you receive, sell, return, or exchange products online or in store—no manual reconciling necessary.