4 benefits of inventory management software for smaller businesses

Published on 12/12/2023 by Ojasvini and Laura Burgess

This article was originally published on 16/03/2022.

In this article, Software Advice outlines the main benefits of inventory management software that can help smaller companies with efficiency, accuracy and control over inventory-related processes. 

benefits of inventory management software

Effective inventory management is crucial to running a small business as it enables cost control, enhances customer satisfaction and contributes to overall operational efficiency. Maintaining optimal inventory levels can help companies avoid overstocking and understocking while reducing holding costs, such as those associated with warehousing and insurance. 

For smaller businesses, investing in technologies has numerous advantages over traditional manual inventory methods, especially aiding inventory reporting and tracking. So, what are the main benefits of inventory management software for companies? 

What is inventory management?

Inventory management is a process that includes controlling and tracking an organisation’s inventory as it is purchased, manufactured, used, stored, and distributed. The system comprises different steps, from when companies buy the raw materials to selling the product to the customer. This process ensures companies have the appropriate quantity of products and enough storage space. 

How does inventory management software work?

Inventory management software can help businesses track, manage, organise, and efficiently store products to meet customers’ demands. Such tools help streamline how companies source, store, and distribute items to make them available to be purchased by customers. With the help of these tools, businesses can ensure that ample inventory is maintained to avoid potential interruptions in supply chain and daily operations. 

For instance, suppose customer X visits a department store and notices that the products are organised in various categories, stored on different shelves, and labelled with prices that might change. Here, the software could help determine the exact location of the products and offer insights to store owners about the demand and supply for every product. The tool —in short— keeps track of the flow of a product from the first instance it is delivered to the supplier through the complete production process until it reaches the customer. 

The inventory management process might include all the required steps, from tracking and managing items moving from suppliers to storage spaces to customers. 

The general steps involved in the process are as follows:

What are the benefits of inventory management? A look at the processes. 

Inventory management software is not to be confused with warehouse management systems, as although they have similar features, the latter is solely designed for warehouse operations. Both, however, are essential components of the supply chain and logistics operations. 

What are the benefits of inventory management software?

As per a report by Global Market Insights, the market size of inventory management software was US$3 billion in 2019 and is predicted to increase by 5% from 2020 to 2026. This study might indicate how important it is for SMEs to organise and streamline their inventory management process. 

Below, we have given some benefits of inventory management systems. 

1. Helps track inventory 

Inventory management software might help businesses keep track of their inventory in real-time —for instance, which particular product is located where; what is the demand for that product and so on until it finally reaches the customer. This feature might help reduce the possibility of human errors, such as an error in maintaining a spreadsheet for inventory tracking, which could potentially lead to financial loss. 

2. Gives a centralised view of all transactions

Some inventory management systems may offer a centralised dashboard to view all the transaction updates and check the order status. With such a dashboard, you can also look up a product's serial or batch number. In addition to this, you can track a product’s movements and even check the expiration date of a product.

3. Forecasts potential future demand for better service

The right inventory management software might help analyse the potential future demands of customers via a centralised dashboard. The dashboard could help businesses understand which particular product might have the maximum demand by tracking purchase patterns, thereby assisting them in keeping sought-after products in stock. 

Also, businesses can compare their performance using such platforms at the beginning and end of a particular time period. Using some inventory management software, you could also import and export analysis reports in different formats. 

4. Generate analytics reports to calculate profit or loss

Some software might also help generate a consolidated analytical report to calculate profit or loss by giving the exact number of orders and the associated expenses for purchasing raw materials to complete the production process. With the help of such reports, businesses can analyse which product is the most profitable, in demand, and which is the least profitable. This data can then be used to make informed decisions while purchasing raw materials and manufacturing products.

What is the key takeaway?

There might be many different options available for smaller businesses when managing inventory. Companies must consider the benefits of inventory management software before investing in the tools, acknowledging that the appropriate software can help create an efficient and more streamlined process for customer satisfaction and business operations. With the help of an effective system, you could potentially increase profits, analyse sales patterns, predict future product requirements, and enhance customer loyalty.

Looking for inventory management software? Check out our catalogue.

This article may refer to products, programs or services that are not available in your country, or that may be restricted under the laws or regulations of your country. We suggest that you consult the software provider directly for information regarding product availability and compliance with local laws.

About the authors

Ojasvini is a content analyst for Software Advic. She shares insights about software technologies critical to SMEs. Inspired by growing tech trends and how these help SMEs to grow.

Ojasvini is a content analyst for Software Advic. She shares insights about software technologies critical to SMEs. Inspired by growing tech trends and how these help SMEs to grow.


Laura is a Content Analyst, researching and giving insight on tech trends to help SMEs. Graduate of Bath Spa University, UK. Based in Barcelona after years of living in Australia.

Laura is a Content Analyst, researching and giving insight on tech trends to help SMEs. Graduate of Bath Spa University, UK. Based in Barcelona after years of living in Australia.