15 Nov Set Up A Better End-Of-Year Inventory System
If your business maintains inventory, IRS rules require you to either count your complete inventory annually or implement a perpetual counting system.
Periodic inventory systems
Large organizations usually count subsets of inventory on a rotating schedule throughout the year. This method is easier than doing a physical count of all inventory at one time, it is less disruptive, and saves money. Most important, it can give you a clear picture of which products are being bought and when, enabling you to take advantage of sales opportunities like accessories and related opportunities.
- Smaller business often do not use periodic inventorying because they do not have the data system set up to handle it. Periodic inventorying requires that your inventory system be integrated with your accounting system.
- We can set up an easy-to-use system that requires minimal training.
- We can get it done this year so you’re set to go on January 1st.
End-of-year inventory count
Businesses can do a physical inventory at the end of the year, but this requires shutting down shipping and inventory. It is also time consuming and subject to error, particular in businesses that are not automated. It can also consume a lot of resources, especially employee time.
- If you are not automated, we can set up a simple system that will reduce the margin for error, ensuring tighter controls and better accuracy.
- As part of getting ready, spare parts and damaged goods must be inventory and vendor RMAs (returned merchandise authorization) forms need to entered in your accounting software, such as QuickBooks.
- Generally, it is best to have items counted twice by different teams; physical counts are entered in inventory sheets in your accounting program and adjusted so that physical and accounting records reconcile.
Combination inventory systems
Some businesses opt to use both systems. This allows them to manage inventory closely and keep updated accounting records. The year-inventory can then act as a check-and-balance to get errors.
- Not sure which system to use? We can look at your business, the types of inventory you maintain and work with your accountant to set up the best system for you.
- If you don’t have an accountant or strong bookkeeping system, no problem. We can take of both for you.
- Most small businesses don’t realize how powerful QuickBooks is, and fail to take advantage of all its features, particularly those related to inventory counts.
Do you need more effective inventory control?
Raw materials and finished merchandise represent a major expense for any small business. Most restaurants, for example, lose a substantial amount of profits due to “back door” losses – inventory such as wine or other goods being lost to employee theft. Inventory management can be expensive due to storage, insurance, taxes, and staff time costs. A better system can mean more returns, without any other change in your way of doing business.
- Let us conduct an inventory system audit. We can run charts that will show how often inventory turns over and set guides for goals and progress.
- We will research standards for your industry so that your inventory turnover can be compared to an aggregate of other businesses in your industry.
- Computerized record-keeping will allow you to make inventory control a routine part of your business, allowing you to more effectively fill consumer demand.
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