How to Create an Inventory List (2024)

Any business that holds inventory can understand the challenge of keeping track of the goodsit has in stock — and the more items it stocks, the harder that can be without aninventory list that details what the company has in its possession. An inventory list alsoadvises when to replenish products, when products are hanging around too long and otherfactors that can affect the company’s carrying costs and overall financials. Like somany other business processes that benefit from real-time data and automation, so, too, dothe activities associated with managing and maintaining inventory lists.

What Is an Inventory List?

An inventory list provides an organized summary of every product a business has in stock,such as raw materials, components, works in progress and finished goods. It typicallyincludes each item’s SKU number, name, description, unit cost, quantity in stock andreorder point. An inventory list is an important tool for tracking inventory performance andturnover, as well as for demand forecasting.

Key Takeaways

• An inventory list includes item details, such as the SKU, name, description, unit costand quantity.
• Inventory management tools and automation help improve accuracy, stock control andprofitability, compared to manual methods.
• Maintaining accurate inventory lists is important for income tax reporting becausebusinesses need to record their end-of-year inventory correctly in order to file taxes.

Inventory Lists Explained

An inventory list helps a company stay on top, and in control, of every item it hasavailable. Not only does an inventory list track physical counts but, at a higher level, ithelps businesses make informed decisions about purchasing, production and sales.

The most useful inventory lists provide a real-time view of what a business has on hand,measure the efficiency of inventory turnover and pinpoint slow-moving or obsolete items. Bytracking which inventory is not being used orsold, the business can decide to sell, mark down or write off stale inventory to reduce carrying costs,such as warehouse storage fees, insurance, and employee costs to handle and manage theinventory. Accurate inventory lists are also useful for tax-reporting purposes.

Why Inventory Lists Are Important

Inventory lists provide a clear picture of what a business has in stock, how efficiently itis turning over inventory, whether it’s running low on an item and needs to restock and, conversely,whether it has too much on hand and needs to execute a way to reduce the amount, such as byoffering a discount. An inventory list helps ensure that the right amounts of products areavailable when customers need them, so as not to lose them to competitors. This can alsoimprove cash flow, sales revenue and profitability. If a business’s inventory list isout of date or inaccurate, the business risks running out of inventory (stockout), accumulating inventorythat isn’t selling (dead stock), higher carryingcosts and loss due to shrinkage.

Additionally, inventory lists help businesses make informed decisions about purchasing andproduction, which can lead to greater profitability.

What to Include on Inventory Lists

How much information to include on an inventory list depends on the individual business, itsindustry, how much inventory it has and its method of recording. Consider capturing at leastthe following details, keeping in mind that products with variations — such as size,color, make and model — should be accounted for individually.

• Name of the item.
• SKU (stock-keepingunit), serial number and/or barcode that identifies an item.
• Category and/or brief item description.
• Name of manufacturer or supplier.
• Unit cost.
• Sale price.
• Quantity in stock.
• Total value.
• Reorder point, triggeredby having the minimum quantity of the item in stock.
• Days per reorder.

How to Create an Inventory List

The usefulness of inventory lists dates back thousands of years, according to archeologistGunter Dreyer, who believed that writing developed out of early marks used to count thekinds and amounts of goods stocked at ancient warehouses. These days, businesses typicallyrely on one of three different methods to create an inventory list:

Manual Inventory Lists

To create an inventory list manually, an inventory manager has to physically counteach item in stock and record the information on a form or template they create or download.For the most accurate results, the list will need to be updated to keep pace with how ofteninventory levels change. The more items a business carries, the more time-consuming anderror-prone this method can be.

Excel

Excel, Google Sheets and others spreadsheet programs are the next step up from manualinventory lists. But that’s not to say they don’t require manual data entry,because they most certainly do, including creating columns for all the information to betracked, adding rows for each product in stock, filling in their pertinent data andprogramming behind-the-scenes formulas so that an update to one field recalculates another.Inventory list templates can be downloaded from the web so a business doesn’t have tostart entirely from scratch.

Inventory Management Tools

Manual inventory lists and spreadsheets are rarely sustainable for businesses that havegrowing volumes of inventory and/or multiple locations and sales channels. That job is besthandled with inventory management software that can automatically create and updateinventory lists in real time and with the highest degree of accuracy. This“magic” is achieved via integration with barcode scanners, radio-frequencyidentification (RFID) tags, point-of-sales (POS) systems and other forms of“smart” devices that communicate the movement of inventory. Inventory managementsystems can also automate inventory counting, send automatic notifications when stock levelsare nearing their reorder points and automatically generate reports.

9 Reasons to Automate an Inventory List

Growing businesses, such as those in the retail sector, that have multiple locations ormanufacture many raw materials to create finished products, can benefit from an automatedinventory list. Here are some solid reasons why a business should consider using anautomated inventory list:

1. Save time and effort: Automating an inventory list significantlyreduces or eliminates the need for time-consuming, labor-intensive manual data entry andcalculations, as well as list-updating and product-tracking.
2. Increase accuracy and visibility: Manual processes are prone to error— think of the consequences of a simple mistype of 15 items in stock when itreally should be 150. An automated inventory list provides an accurate, real-timerepresentation of what a business has in stock, which is particularly important whenhandling large volumes of inventory across multiple locations.
3. Stay in control of stock: The more accurate an inventory list, thebetter able a business will be to retain control of its stock, because it knows exactlywhat it has on hand, when it’s time to replenish and when it’s time to castoff items that aren’t selling. This also makes for a well-oiled supply chain.
4. Improve inventory turnover: Inventoryturnover is measured as the length of time that elapses between when an itemfirst comes into a business’s possession until the moment it is purchased. Anautomated inventory list provides real-time inventory performance data, enablingbusinesses to become more efficient by, for example, identifying slow-moving or surplusstock that could use a form of incentive to be sold. Conversely, fast-selling items canbe replenished more quickly.
5. Lower carrying costs: Unsold inventory not only represents unrealizedsales revenue, but it also costs the business in terms of storage, taxes and insurance.An automated inventory list can help contain these so-called carrying costs by trackingand flagging slow-moving products.
6. Better data analysis and reporting: The more a business can understandwhat’s going on with its inventory, the better positioned it will be to make theright inventory-related decisions. An automated inventory list not only provides thatinformation, it also ensures its accuracy and timeliness.
7. Inform forecasting and budgeting: The past and present are often goodpredictors for the future. In terms of inventory, the precise, real-time data found onan automated inventory list can help businesses plan for anticipated customer demand andestimate how much and what kind of resources they’ll need to purchase those goods.
8. Ease tax preparation: The amount of inventory a business has remainingat the end of an accounting period affects its cost of goods sold(COGS), which, along with the company’s inventorymethodology, impacts its gross profit and gross margin and ultimately factorsinto how much it owes in taxes. COGS appears as a line item on the company’sincome statement, following revenue. Automated inventory lists ensure that theaccounting team is working with the most accurate information.
9. Boost revenue and profitability: All of the preceding benefits can leadto the ultimate benefit of them all: increases in the business’s top and bottomlines. And it all begins with an accurate inventory list.

Inventory List Examples

Digital or physical, an inventory list is a living, breathing document that requires constantcare for the highest level of reliability — and the more automated its upkeep, themore accurate the list. As mentioned earlier, inventory comes in many forms, including rawmaterials and components, works in progress and finished goods ready for sale. At itssimplest, an inventory list is formatted as a grid; each row contains a single item and itsdetails, which are specified by the columns. Column labels typically include an item’sname, its SKU, its unit price and quantity in stock. More advanced lists, usually the domainof automated software, are especially useful for businesses with many different types andvariations of inventory.

As an example, let’s think about a basic inventory list for a hypothetical toy storenamed Fun ’n’ Games. The list contains all of the games it stocks on premises.Each game has a unique SKU, even for variations of the same game, such as Monopoly andMonopoly Junior. Also included on the list: the game’s name, its maker (for example,Hasbro), its unit price (how much the game cost the store to purchase), how much the storecharges customers for the game, how many games are in stock, value of the inventory (unitprice times quantity), when it’s time to reorder and, finally, the time it takes for areorder to be received.

What happens to the list if Fun ’n’ Games has five stores and an offsitewarehouse to which games are allocated? Each store and the warehouse, theoretically, couldmaintain its own inventory list, but without the big-picture view of how much inventoryexists at each location, which only software can provide, it’s easy to see howdifficult inventory management would quickly become.

Free Inventory List Template

An inventory list is a critical tool for tracking inventory. Businesses can create their owntemplates or download a version that best matches their needs. Inventory management softwarealso provides this functionality at a more detailed, and automated, level.

Optimize Inventory Levels and Boost Profitability With NetSuite

Creating and managing inventory lists can be a time-consuming and complex task, especiallywhen handled manually. In addition, the lists may not necessarily be up to date at any givenmoment. So how can a business be sure of how much exact inventory is in stock or when itemsneed to be reordered? After all, the last thing it wants to do is disappoint a customer bynot having a product in stock and end up losing the sale. NetSuite InventoryManagement is the answer. The solution accurately tracks inventory levels acrossmultiple locations and sales channels for companywide visibility; automatically updatesinventory lists when items are sold, received or returned; and generates alerts when stockneeds to be replenished. It also provides real-time inventory reports and analytics,enabling businesses to make data-driven decisions in the moment and to use the data forforecasting and budgeting purposes.

A well-maintained inventory list helps businesses track inventory levels, monitor stockmovement and decide when to reorder inventory or reduce on-hand quantity. Accuraterecord-keeping is paramount — a job best performed by software that automates theprocess in real time and eliminates all the mistakes that can occur when handled manually.By optimizing inventory levels with software, businesses can keep their most in-demand itemsin stock, reduce costs associated with overordering and storage, and more, and also increasetheir revenue and profit.

Inventory List FAQs

What is an inventory list for?

A business uses an inventory list to keep track of items, such as products for sale and rawmaterials. The inventory list also reflects what items are available and ready for sale oruse, and when certain items are running low.

What are inventory list best practices?

One best practice is to automate inventory lists so they’re updated in real time whenan item is used or sold. That means ditching paper, pens and spreadsheets in favor ofinventory management software that improves overall efficiency and data accuracy.

Can I use Excel for my inventory lists?

Yes, Excel can be used to create an inventory list and generate templates for future use. ButExcel, or any other spreadsheet program, still requires people to manually enter and updatedata, which leaves this method prone to error.

What is the best tool for managing inventory lists?

The best tool for managing inventory lists is inventory management software that automatesmuch of the process in real time. Businesses first starting out or those that carry minimalinventory may use a spreadsheet for their lists, but that method will likely becomeimpractical as they grow.

How do I make an inventory list?

An inventory list is a detailed record of items or goods held in stock by a business. It canbe created manually, using a spreadsheet or with inventory management software.

Why is an inventory list important?

An inventory list is important because it tells a business exactly what products or items areavailable in stock for use or sale, what to reorder, what to scale back and other detailsthat can help cut down on expenses and even boost revenue.

How do I make an inventory list in Excel?

In its most basic form, each Excel row corresponds to a specific item and its relevantinformation, which is organized into columns. Premade templates can be found online.

Does Word have an inventory template?

Multicolumn tables can be created in Word. There is also a function to create an Excelspreadsheet and “Quick Tables” within the Word document.