When Should You Implement an Inventory Management System?

At some point in every product-based business, the question comes up: When is the right time to implement an inventory management system?

It’s a smart question, and one we hear often from founders and entrepreneurs looking to scale. While it might seem like the answer is “as soon as possible,” the truth is a little more nuanced. In fact, at Accountfully, we believe waiting a little longer than you think is often the best decision.

Here’s why, and how to know when the time is right.

Start with the Basics: Get Organized First

Before you start evaluating inventory software options, make sure your foundation is solid. That means understanding your current process for tracking inventory, landed costs, and cost of goods sold (COGS). Start simple: track it manually and see what it tells you.

At this early stage, your priority should be building good habits:

• Do monthly inventory counts.
  
  
• Get familiar with your margins.
  
  
• Review your financial reports regularly.
  
  
• Understand your product profitability by sales channel, if possible.
  
  

Many of our clients begin by managing inventory with spreadsheets and simple tools. It’s low-cost, flexible, and gets the job done, especially if you’re under $1 million in annual revenue.

When Manual Tracking Isn’t Enough

Once you’ve established your process and begin to scale, cracks will start to show. Here are some signs that it might be time to invest in an inventory management system:

1. Your Inventory and Supply Chain Are Getting More Complex
If you're managing more SKUs, producing in-house, or dealing with co-manufacturers, you’ll quickly hit the limits of spreadsheets. Complexity in procurement, shipping, and production is a key trigger for upgrading.

2. You’re Struggling with Cost Clarity
If you can’t get a handle on your true product costs—especially with fluctuating inputs like freight or raw goods—you need a better system. Software can help allocate costs correctly and keep your pricing profitable.

3. You’re Importing Goods or Using Multiple Warehouses
Importing involves duties, taxes, and freight, all of which must be tracked and attributed accurately. Similarly, if you're working with multiple 3PLs or need real-time visibility across locations, spreadsheets won’t cut it.

4. You Need Better Forecasting and Reordering
A good inventory system can automate safety stock levels, reorder points, and purchase planning. That’s a game-changer for cash flow and avoiding stockouts or overstocking.

5. Your Team Needs Workflow Support
If multiple team members are involved in purchasing, receiving, shipping, and inventory transfers, a centralized system brings efficiency and accuracy to the process.

Choosing the Right Time (and the Right System)

Still not sure if you’re ready? Consider this: over 60% of the inventory-based businesses we’ve worked with started by managing inventory manually. You’re not behind.  You’re being smart.

When the time is right, your next step is to:

• Choose the right system for your needs.  We often recommend Cin7 Core.
  
  
• Find the right partner. Someone who can guide setup, data import, and ongoing updates.
  
  
• Invest in training and ongoing management to make sure the system supports your financial reporting, not just your operations.

The Bottom Line

Don’t rush into an inventory management system just because it seems like the “grown-up” thing to do. Build the habits and develop the understanding first, then invest when the need becomes clear.

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Need help figuring out where you are in that journey? At Accountfully, we’ve helped hundreds of product-based businesses build the foundation and scale the right way when the time is right.  We are just a conversation away, should you need support.