Taking stock of your stock
Inventory is a much-disliked aspect of accounting because it is complicated. However, with careful attention, logical thinking and a solid understanding of your business, processes and systems – it’s not as difficult as first anticipated.
What is inventory?
Inventory is the items that a business has bought or manufactured with the intention of reselling to customers. The items may be resold without change, or they could be combined into a new product.
Types of inventory
There are various types of inventory, but there are three broad categories.
- Inventory for reselling
These are items for sale in a shop with extra supplies in storage.
- Installation inventory
Service providers will keep inventory of the products they sell along with their labour.
- Manufactured goods
Manufactured stock is complex due to the different phases of the project. There are three types of manufacturing inventory.
- Raw materials inventory:
This will be used to make something.
- Work in progress inventory:
These are items that are still in production, not yet ready for sale but have moved past the raw materials stage.
- Finished goods inventory:
- Raw materials inventory:
The manufacturing process is complete, and the items are ready for sale.
Inventory Reminders for Accountants
- Inventory is an asset.
Inventory is a core asset. It must be accurately and consistently tracked.
- Inventory isn’t straightforward.
Many companies have complex inventory situations due to varied reasons such as different locations, manufacturing, or imports. This is challenging for bookkeeping functions.
- Recording of inventory.
Whatever happens in real-life must be recorded digitally. This keeps inventory management accurate, and helps keep everybody on the same page.
- Don’t ignore discrepancies.
All discrepancies must be identified and recorded on the profit and loss statement.
- Don’t over or under stock.
Too much stock is money sitting in the warehouse, while a lack of stock means a reduced flow of revenue.
- Use the right inventory management system.
Using the right inventory management system for your business will help you stay on top of your inventory and your accounts. An inventory management system will handle the backend of transactions and reduce errors.
Download our ultimate checklist for inventory accounting
Learn from our inventory management approach to accounting and reap the benefits immediately. This checklist helps you manage your inventory accounting like a professional by showing you how to:
- Develop best practices for your daily, weekly and monthly inventory management routines
- Find the best technology for your business
- Help your accountant understand your business, and give them what they need straight away.
Click here to download the ultimate checklist
The expert-approved checklists will help you to properly manage your inventory and help your accountant efficiently and effortlessly.
Get an expert on board
Do you have a business that deals with inventory? Do you need to move your business and inventory management to the cloud? We can help you transform your business with industry-leading cloud inventory management software and add-ons forming the best possible system for your business. Our clients have seen increased efficiency and a reduction of cost and time managing their inventory and sales channels. Contact us today to find out more.