How to Track Inventory for a Small Business for Free

Last updated: September 2026

You’ve got products to make and orders to fill. Stopping to count stock or rebuild a spreadsheet formula feels like the last thing you have time for. But if you don’t know what materials you have on hand, you’ll run out mid-batch, or worse, you’ll tie up cash buying supplies you already have sitting on a shelf.

The good news: you don’t have to spend money to start tracking inventory properly. The bad news: “free” isn’t always actually free once you count the hours you’ll spend maintaining it.

Here’s an honest look at every option, what each one costs in time, what breaks first, and when it’s time to move on.

Why tracking inventory matters even when you’re just starting out

Most product businesses wait too long to start tracking. The typical story: “I’ll sort out proper tracking once I’m bigger.” Then the business grows, the chaos compounds, and untangling a year of guesswork becomes a bigger job than if you’d started properly on day one.

There’s a real cost to winging it. If you don’t know what a product costs to make, you can’t price it profitably. If you don’t know how much material you have, you’ll either run out mid-order or over-buy and sit on dead stock. And at tax time? Without accurate inventory records, calculating your cost of goods sold becomes a nightmare, or an expensive accountant problem.

The good news is you don’t need fancy software to get started. A notebook works. A Google Sheet works. The key is actually using something consistently, rather than waiting until you have the perfect system.

What should a small business track in its inventory?

At minimum, every product-based small business needs to track four things: what materials you have, how much they cost, how much you use per product, and when you’re running low.

More specifically:

For raw materials:

• Material name and unit of measure (grams, oz, metres, units)
• Quantity currently on hand
• Cost per unit (updated when you reorder at a different price)
• Reorder level, the quantity that triggers a new order before you run out
• Supplier name and usual lead time

For finished products:

• Product name and SKU
• Quantity on hand
• Cost to make per unit (your COGS, materials + labour + a share of overhead)
• Sales velocity, roughly how many you sell per week or month

For tax purposes:

• Beginning and ending inventory value for each financial year
• Total materials purchased during the year
• Total finished goods produced (and what they cost to make)

You don’t have to track all of this perfectly from day one. But knowing what eventually needs to be in your system helps you choose the right method, because some free options can’t handle all of it, and that matters when you’re choosing.

For a deeper look at what COGS means and how to calculate it properly, see our COGS guide for small businesses.

Method 1: Pen and paper

A notebook, a clipboard, or a whiteboard, this is where most small producers start. And for day one, it’s genuinely fine.

You write down what you buy. You cross off what you use. You count remaining stock when you’re packing orders. Simple, tangible, free.

Where it works: If you have 10 or fewer materials, sell from a single channel, and make one or two product types. A candle producer with three wax variants and a handful of fragrance oils can manage this reasonably well.

Where it breaks down, and fast:

The moment you scale past a handful of SKUs, paper becomes the enemy. There’s no way to know how much material a batch of 20 candles will consume without doing the math yourself, every single time. No alerts when beeswax drops below a week’s supply. No way to quickly answer “do I have enough to fulfill this wholesale order?” without digging through pages of notes.

Worse: if you spill something on your notebook, leave it at the market, or skip updating it during a busy week, your “records” become worse than useless, they’re actively misleading.

And when it’s time to file your taxes? Pen and paper gives you nothing for COGS calculation. You’re back to a pile of receipts and a calculator.

Honest verdict: Start here if you must, but plan to move on. Paper tracking is fine for a month, not a year.

Pros:

• Zero cost, zero setup time
• No technology required
• Fast to start

Cons:

• No current stock picture, you only know what you’ve written down
• No backup (fire, flood, coffee spill, and your records are gone)
• Can’t calculate COGS automatically
• No low-stock alerts
• Impossible to scale beyond very simple inventories
• Can’t share with a team member or VA

Method 2: Spreadsheets (Excel or Google Sheets)

Spreadsheets are the dominant choice for early-stage product businesses. About half of our customers used Excel or Google Sheets before switching, which tells you both that spreadsheets are genuinely useful and that they eventually stop being enough.

For simple needs, a spreadsheet works well. You can track materials, build a simple bill of materials (BOM) for each product, and update quantities as you use stock. Google Sheets is free and accessible from any device. You can share it with a partner or VA.

Robin from Messy Play Kits stretched spreadsheets further than most, tracking dozens of components across 24 different activity kits. It worked, until it didn’t. “It starts to get unwieldy,” she said. “And it starts to make less and less sense.”

That’s the typical arc. A spreadsheet that took a few hours to build becomes something that requires constant maintenance, and eventually you stop trusting the numbers in it.

Getting started with a free inventory spreadsheet

If you’re starting out, a basic Google Sheets inventory tracker needs five columns at minimum: Item Name, Unit of Measure, Quantity on Hand, Cost per Unit, and Reorder Level. Add a separate tab for your products with a bill of materials for each one, list each ingredient, the quantity used per batch, and link the cost back to your materials tab.

If you’d rather not build one from scratch, our free raw material inventory Excel template gives you the structure already laid out.

The three real failure modes

1. COGS calculation is fragile. You can build a formula to estimate cost per product, but as soon as a material price changes or you switch suppliers, you have to update every formula that touches that material. One missed cell and your COGS numbers are wrong, silently wrong. “I can’t afford to make a mistake just because of some oversight on a cell formula when we have a big contract at stake,” as one customer put it.

2. Multi-channel selling breaks the model. When you’re selling on Etsy, at a market, and direct from your website, your spreadsheet doesn’t know about any of those sales unless you manually update it after every single order. Forget one market sale and your material quantities are off. Skip a week and the spreadsheet is useless.

3. Keeping it current requires discipline you won’t always have. The spreadsheet only knows what you tell it. When you’re packing orders at 11pm or rushing to fill a wholesale shipment, updating the spreadsheet is the last thing on your mind. The gap between “what the spreadsheet says” and “what’s actually on the shelf” grows, and at some point you stop relying on it at all.

Pros:

• Free (Google Sheets) or included with most computers (Excel)
• Highly customisable to your specific products and workflow
• Familiar, most people already know how to use it
• Easy to share with a partner or accountant

Cons:

• Manual updates required, no automatic deductions when you sell or manufacture
• COGS formulas break silently if you’re not careful
• Doesn’t connect to Etsy, Shopify, or other sales channels
• No low-stock alerts or reorder reminders
• Doesn’t scale well past ~50 materials or a few product variants
• Year-end tax prep still requires manual COGS calculation

Method 3: Free inventory management apps

Several inventory apps offer genuinely free plans, not trials, but ongoing free tiers. These are worth knowing about, especially if spreadsheets feel too manual but you’re not ready for paid software.

Zoho Inventory (free plan)

Zoho Inventory has a free plan that supports up to 50 orders per month and basic item tracking. For a business in the very early stages (selling a handful of items on one channel) it covers the basics. The free plan includes item creation, order tracking, and basic reports.

The catch: 50 orders/month is a hard ceiling. If you run a weekend market and take 60 orders, you’re locked out until the next month unless you upgrade. There’s no BOM or recipe costing feature, so you’d still need a spreadsheet to calculate what each product costs to make.

Best for: Service or simple product businesses, not manufacturers who need BOM costing.

Square for Retail (free tier)

Square’s free plan includes basic inventory tracking if you’re already using Square for payments. You can set quantities, receive low-stock alerts, and run simple reports. It works well if you sell primarily in person and want something tied to your point-of-sale.

The limitations: it tracks finished products, not raw materials. If you manufacture, you need to track both, what you have on the shelf and what went into making it. Square’s free tier doesn’t do recipe costing or material inventory. You’d need to layer a spreadsheet on top.

Best for: Retail businesses, pop-up sellers, and market vendors who need POS-linked inventory. Not suited for production tracking.

Airtable (free plan)

Airtable is a flexible database tool with free inventory templates. The free tier allows up to 1,000 records per base and basic views. You can build a reasonably sophisticated inventory tracker with formulas, linked records (materials → products), and even low-stock views.

The downside: it’s a blank canvas. You have to build your own system from scratch (or start from a template), and there’s no Etsy/Shopify sync. It’s essentially a more powerful spreadsheet, with all the same “you have to update it manually” limitations.

Best for: Businesses comfortable building their own tools that don’t need sales channel integration.

Honest verdict on free inventory apps

Free tiers exist, but they come with real constraints. None of the genuinely free plans are built specifically for small manufacturers who need BOM costing, material inventory, and sales channel sync in one place. If you outgrow spreadsheets, you’re usually also outgrowing what free apps offer.

Method 4: Paid inventory software with a free trial

This is where most growing product businesses land eventually, and the honest truth is: they usually wish they’d started sooner.

Dedicated inventory software (Stocksmith included) works fundamentally differently from a spreadsheet. It’s a perpetual inventory system, meaning stock levels move on the events themselves rather than on you remembering: materials are received, products are manufactured, orders are imported. You’re not manually updating a cell. The system knows.

Here’s what that looks like in practice for a soap or candle producer:

• You enter a bill of materials (let’s say your lavender bar soap uses 100g coconut oil, 80g lye, 50g lavender fragrance, 60g water)
• Every time you record a batch, the system deducts those exact quantities from your material stock
• When coconut oil drops below the low-stock threshold you set, it’s flagged on your dashboard and in the Materials Reorder report
• Orders from your connected sales channels are imported on a schedule, so there’s no copy-pasting
• At year-end, your COGS is already calculated, by product, ready for your accountant or Schedule C

That last point matters more than most new businesses realise. Calculating COGS accurately is legally required for product-based businesses, and it’s genuinely difficult to do correctly from spreadsheets alone.

What Stocksmith specifically does:

• BOM and recipe costing — enter your bill of materials once; Stocksmith maintains a weighted-average cost per unit and reflects material price changes as you record new purchases
• Material inventory — tracks raw material stock with automatic deductions against the BOM whenever you record a manufacture
• Multi-channel order sync — imports orders from Etsy, Shopify, Amazon, WooCommerce and more on a schedule (nightly on the entry plans, hourly on Business and above). The number of channels you can connect depends on your plan: Pro covers one, Studio and above are unlimited
• Low-stock thresholds — set a per-material reorder point and Stocksmith flags it on your dashboard and in the Materials Reorder report, so you can act before you run out
• COGS and tax reports — year-end reports that your accountant can actually use
• Batch manufacturing — track what you’ve made, what it cost, and what went into each batch

The biggest objection is usually cost. Stocksmith starts at $24/month, with a free 14-day trial. For most businesses, the time savings alone pay for that, if you’re spending 3-4 hours a month on spreadsheet maintenance, you’re paying more than $24/month already in your own time.

Pros:

• Stock levels maintained by the system, no manual updates required
• Weighted-average COGS calculated per product
• Connects to Etsy, Shopify, Amazon, and other channels
• Low-stock thresholds so you order before you run out
• Year-end reports ready for tax time
• Scales from solo operator to growing team

Cons:

• Not free after trial (Stocksmith starts at $24/month)
• Takes a few hours to set up and enter initial data
• More than you need if you have very simple inventory (5 materials, 2 products)

Side-by-side comparison

When you’re ready to graduate from free

Free methods are genuinely fine at the start. If you’re making 20 products a month from 10 materials and selling through one channel, a spreadsheet handles that.

The tipping point comes when free stops being free, in time. Watch for these signs:

• You’re selling on 2+ channels and manually reconciling them after every market day
• You have 20+ materials and regularly discover you’re out of something mid-batch
• You’ve missed a sale because you oversold a product you thought you had in stock
• Tax time takes you more than a day to calculate COGS from your records
• You don’t trust your own spreadsheet anymore, and you’re manually counting stock to verify it

When any of those happen, the “free” method is costing you more in time than paid software would cost in money. That’s the real break-even point.

If you’re at that stage, running a proper stocktake is how you establish a reliable baseline before moving to any new system, paid or free. Our free inventory count sheet template gives you somewhere to start.

For businesses already tracking inventory who want to calculate reorder points properly, our reorder point formula guide walks through the calculation step by step.

Frequently Asked Questions

No single method is right for every business, and the “correct” answer changes as you grow. Pen and paper gets you started. Spreadsheets carry you through the early growth phase. Free apps fill a middle ground for businesses that don’t need BOM costing. Dedicated software becomes worth it the moment free is actually costing you more than it saves.

If you’re at that point (or curious whether you are) Stocksmith offers a free 14-day trial with no credit card required. Takes about an hour to set up, and most people know within that first session whether it’s the right fit.