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When people begin to develop home based business ideas, they must consider the amount of space that is available in the home to store inventory. If the home based business revolves around music recordings then the space for the inventory can be small. If the business plan includes the buying and selling of large pieces of machinery, then the home based business inventory will require several acres of land. Home business inventories can cramp a family lifestyle if it is too large.

Home based business inventory will not only include the product but the materials that are needed to deliver the product to the customer. Mailing boxes can be acquired free of charge from the post office but they will take up floor space in a home. Additional storage space will be needed for the rolls of tape that post office's require, and digital postage machines will take up a considerable amount of desk space. Home offices will require shelves to store home business inventories on but the footage required for each can be custom fitted to save space.

The home based business inventory will often include a home computer and a printer. The purchase date of these items will be needed when the company prepares business taxes at the end of the year. Any item purchased for business use will become part of the business inventory and should not be used for personal projects around the home. The home based business owners should record all inventory items in a business record book to make tax filing requirements simpler, and the home based business inventory values should be tallied at the start of the New Year.

Any damages that occur throughout the year to home based business inventories should be meticulously documented. Customer chargeback costs should be annotated because these absorbed costs will affect the profit and loss statements on the Schedule C. Some home business inventory suppliers will give credit for items which are damaged in shipment and not require business owners to return the damaged product. The home business owner is presented with a unique opportunity to sell the product in its present condition and make additional profit from that particular inventory sale.

Home based business inventories should be reduced to lowest quantities at the end of every year to speed the physical inventory counts. Home based business inventories will be simpler if ordering guidelines are in place that prohibits ordering after a certain day of the year. There will be many audits conducted at the end of the year to provide the totals needed to file income taxes. The end of the year is generally set aside because most businesses do not sell a tremendous amount of inventory right after Christmas, and excess inventories can be offered at reduced prices to make room for new products.

Some inventory counts will give the small business owner an idea of which products are the best sellers. This information can be used as a marketing tool on an online retail site that represents the home based business in the internet retail world. Some home based businesses have increased sales due to this simple marketing strategy and by increasing inventories on the best sellers, home based business owners are able to increase their profit margin without very much effort.