Best inventory management software for small businesses

Published Monday 12 January 2026

Table of contents

• What is inventory management software?
• Why small businesses need inventory management software
• Key features to look for in inventory software
• How cloud-based inventory software helps your business
• Integration with accounting and business systems
• Finding the right inventory management software
• Get started with smart inventory management
• FAQs on inventory management software

Key takeaways

• Implement cloud-based inventory management software that integrates with your accounting and point-of-sale systems to eliminate manual data entry errors and provide real-time visibility across all business operations.
• Prioritize software features like automated reordering, real-time stock tracking across multiple locations, and mobile access to manage inventory decisions from anywhere while avoiding stockouts or overstocking.
• Utilise inventory analytics and reporting tools to identify your best and worst-selling products, optimize supplier costs, and make data-driven decisions about when and how much to reorder.
• Replace manual spreadsheet tracking with automated inventory software that scales with your business growth and frees up time to focus on customer service and business development.

What is inventory management software?

Inventory management software helps you track your stock through your business, from purchase to sale. It automates tasks like updating stock levels, reordering products, and providing reports on what's selling well.

This gives you a clear, real-time view of your inventory, helping you avoid stockouts or overstocking. By simplifying stock control, you can make smarter decisions, reduce costs, and free up time to focus on your customers.

Why small businesses need inventory management software

Effective inventory management software tracks your stock levels, sales, and orders automatically, so you always know what you have and what you need. It eliminates guesswork and gives you real-time visibility into your business.

In retail, accurate inventory control can make or break your business. When will an item sell out? When's the best time to restock your best sellers? How much does it cost to store products that aren't selling?

If you want clear answers to these questions at any time, Xero inventory management software can help.

Key features to look for in inventory software

When choosing inventory software, look for features that simplify your daily tasks and provide valuable insights. Here are some key things to consider:

• Real-time stock tracking across all locations
• Automated reordering based on sales data
• Sales and inventory performance reporting
• Barcode scanning to speed up receiving and selling
• Integration with your accounting and point-of-sale systems

How cloud-based inventory software helps your business

Cloud inventory management software transforms how you track and control stock. It's worth the investment because accurate inventory control is critical to retail success.

Here are some reasons cloud-based inventory software works better:

Inventory management should scale with your business

Scalability: Your business will grow and diversify over time. You might open new stores, add product lines, or start selling online.

Modern inventory software adapts to these changes. It makes adding products or sales channels simple. You can compare performance across your entire business from one dashboard.

The cloud lets you sync with other retail software

Integration eliminates manual data entry across your business systems. Traditional inventory management requires entering the same information multiple times.

Cloud inventory software connects your systems automatically, and using a platform that is compliant with Making Tax Digital (MTD) ensures your financial records meet UK requirements.

• Accounting software: records revenue and tax automatically
• Inventory system: triggers reorders when stock runs low
• Performance dashboard: updates profitability data on your mobile
• Inventory system: Triggers reorders when stock runs low
• Performance dashboard: Updates profitability data on your mobile

You can also connect analytics and reporting tools to get a clearer understanding of how your business is performing.

With automated, connected systems, your data updates in real time. It's also free from manual data entry errors and gives you the tools to understand and improve every part of your business. You can also share the data with your partners and financial advisor to get their feedback and suggestions.

Up-to-date data helps you make important decisions

Real-time data helps you make smarter decisions about your inventory. It's not enough to know which products sell most.

You need deeper insights: who buys them, when to reorder, and how much stock to keep. Cloud inventory systems provide this information instantly.

Good systems include tools that give you clear, useful insights about your business:

• Access real-time data: View accurate sales information across all channels
• Drill down into details: Analyse customer groups, product types, and individual orders
• Identify star products: spot your best and worst sellers to optimise ordering
• Compare supplier costs: Find the best deals across your supplier network
• Automate reordering: Set up automatic restocking for popular products

Inventory analytics tools give you the insights to make faster and better decisions. Proper reporting can identify opportunities to reduce costs and improve your marketing.

Manage your inventory on the go

Mobile access lets you manage inventory from anywhere with an internet connection. This flexibility becomes crucial as you expand your business.

You can check stock levels, receive low-stock alerts, and reorder products while away from your store. Real-time access means you never miss sales opportunities.

Multi-location management becomes simple with the right software. Opening new stores typically creates inventory headaches.

You need to monitor inventory across multiple locations and sales channels. But cloud inventory software makes managing five stores as easy as managing one.

Integration with accounting and business systems

Your inventory software shouldn't work in isolation. The real power comes when it connects seamlessly with the other tools you use to run your business.

When you integrate your inventory system with your accounting software, point-of-sale (POS) system, and online store, data flows automatically. A sale recorded on your POS can instantly update your stock levels and your financial records in Xero, without any manual entry. This gives you one reliable set of records for your business, saves you time, reduces errors, and gives you a clear picture of your performance.

Finding the right inventory management software

Find integrated inventory solutions in the Xero App Store, which features apps that connect with Xero accounting software, point-of-sale systems, staff management tools, and analytics platforms.

Get started with smart inventory management

Save time by moving away from manual inventory tracking. Entering numbers into spreadsheets takes you away from growing your business.

Cloud inventory software handles tracking automatically. This frees you to focus on what matters most: building your business and serving your customers well.

Ready to automate your inventory management? Try Xero for free and see how easy stock control can be.

FAQs on inventory management software

Here are answers to some common questions about inventory management.

What are the main types of inventory management?

There are several methods, but four common ones are just-in-time (JIT), which aims to receive goods only as they are needed; materials requirement planning (MRP), for manufacturing; economic order quantity (EOQ), which calculates the ideal order size; and days sales of inventory (DSI), which measures how quickly stock turns into sales.

Can I just use a spreadsheet for inventory?

While you can start with a spreadsheet, they quickly become difficult to manage as your business grows. They are prone to errors, require manual updates, and don't provide the real-time insights that dedicated inventory software offers.

What is the best inventory software for a small business?

The best software depends on your specific needs. Look for a solution that is easy to use, scales with your business, and integrates with your accounting software, like Xero. Many businesses find success with cloud-based platforms that offer real-time data and mobile access, and you can often try them before you buy; some providers, for example, let you access features for 30 days to see if the plan suits your business.