What to Look for in Inventory Software

Choosing the right inventory software can make or break how your business operates day-to-day. Here are three essential questions to ask any vendor before you commit.

Question 1: Does the software handle inventory in Units of Measure AND Dollars?

If the answer is NO, then move on to the next vendor.

Why track inventory in only dollars when it's the units you are selling?

The next time you walk into a retail store and see all the inventory, ask yourself these questions:

• How does management know when to reorder product?
• What is the optimal amount to order given lead times, transportation costs and time in transit?

You may think the store deals in money, which it does, but it's units of measure that generates the money.

I have never witnessed someone saying, "I'll take $83 worth of candles."

Usually, the customer picks out the type, the size, and the scent of the candles and then makes the payment.

Now the retailer has manually recorded what has been sold by type, size, and scent and adjust the inventory levels accordingly. And then the units sold and the cost of each unit sold must be manually tracked somewhere, such as a spreadsheet. Before you know it you will be running your company using 11 different spreadsheets, somehow connected and probably not connected.

This is not a way to manage a business and inventory.

If your accounting software isn't doing that grunt level work you need new inventory software.

Question 2: At what value can you carry your inventory?

Ask your vendor which inventory valuation methods they support:

• FIFO
• LIFO
• Weighted Average

What is the default value of your inventory? If the value isn't the standard price in your latest Purchase Order, you may have defective inventory.

If the answer isn't "All of the Above", move on to the next vendor.

Plus & Minus is an "All of the Above" accounting software company.

Question 3: Does your inventory software allow for negative inventory?

If the answer is No, move on to the next vendor.

Here's the blueprint for negative inventory:

You're on the phone with a customer. The customer wants 20 widgets shipped today. You are placing the order into the computer and the computer freezes.

What? According to the computer, you only have 15 units on hand, and this order for 20 is going to put the inventory count below zero.

But you just received a shipment of 100 units yesterday, and you haven't entered the Received document.

The inventory software is overriding logic!

Your inferior inventory software is killing your business!

You have 115 units! But the computer program says you only have 15!

The computer program will prevent this order from being completed. You may lose this sale and this customer.

Why? Inferior inventory software. Don't be a victim of inferior software!

Frequently Asked Questions

Why isn't tracking inventory in dollars alone good enough?

Dollars tell you what inventory is worth — but they don't tell you what you have, what's selling, or when to reorder. A business runs on units: cases, pallets, SKUs, sizes, colors. Without unit-level tracking, you end up managing reorder points, stock levels, and sales patterns manually — usually across a tangle of spreadsheets. That's where errors creep in and customers get let down.

What's the difference between FIFO, LIFO, and Weighted Average — and does it really matter?

Yes, it matters — especially at tax time and during audits. FIFO (First In, First Out) assumes you sell your oldest stock first, which typically drives higher reported profits during inflation. LIFO (Last In, First Out) assumes you sell the newest stock first, which often cuts taxable income during inflation. Weighted Average smooths out cost fluctuations over time. Your industry, your products, and your accounting strategy should drive that choice. If your software only supports one method, it locks you in — whether that suits you or not.

What happens if we don't allow negative inventory and a shipment hasn't been entered yet?

Your inferior software blocks the sale. Even if 100 units sit in your warehouse, if nobody has keyed in the received shipment yet, a system that prohibits negative inventory will refuse to process the order. That means a customer on the phone — ready to buy — hears that you're out of stock. You may lose that sale and damage the relationship. Real-world operations don't wait for paperwork to catch up, and your software shouldn't either.

Can't we just use spreadsheets to manage inventory?

Many businesses start that way — and most outgrow it faster than they expect. Spreadsheets don't update in real time, they don't talk to your purchasing or sales systems, and they break down the moment more than one person edits them. By the time you're managing reorder points, multiple warehouses, or more than a handful of SKUs, the spreadsheet becomes a liability. Integrated inventory software eliminates the manual work and the costly mistakes that come with it.