ARE YOU READY FOR YEAR-END INVENTORY COUNTS?
End-of-year inventory tasks really put the “count” in accounting. 415 Group senior manager Matt Campanale, CPA, explains the short-term and long-term importance of an organized system and accurate count.
When it comes to year-end inventory counts, it’s important to be both accurate and organized. Let’s first discuss accuracy.
When you have an accurate end-of-year inventory count, it sets you up for success in the new year. The data will provide an accurate number not only for inventory but also for cost of goods sold, which will impact your profit.
An accurate inventory balance could even impact your relationships with lenders, stockholders and insurance companies, as mentioned in the main article below.
At 415 Group, we often see it also having an impact when it comes time to sell the business to a new owner or when new outside investors are brought in. These people rely on the financial statements to get a good picture of where the business currently stands. Inaccurate inventory and cost of goods sold amounts could negatively impact the sale.
Implementing Cycle Counts
If you find that your business already has discrepancies during its year-end inventory counts, you may want to consider implementing cycle counts. These periodic physical counts create a stronger control system. Not only does it help avoid a large adjustment at the end of the year, but it also sends a message to employees that the company is keeping an eye on inventory, which aids in stopping employees from stealing products for personal use or to sell on the side. Now for the importance of an organized system.
Organized Inventory
The article below mentions a handful of ways you can prepare for counting inventory and a visit from your external audit team. The external audit team typically performs a sample of counts to ensure the company’s inventory is materially accurate. In order to keep the process efficient and effective, you’ll want to ensure you are organized.
Knowing where the inventory is ahead of time and being in one single location makes it quite easy for them to take a sample count. Organized inventory will help both you and the external auditor. Everyone involved will appreciate the efficiency and lack of confusion.
Inventory Count Assistance
At our firm, we not only observe inventory counts for many of our clients, but we also assist firms that need help with businesses in our area. For example, an accounting firm in Texas may have a client based in Northeast Ohio. They can reach out to us for inventory observation, which is a more cost-effective solution compared to sending out part of their team for a few days.
So, if your company needs help with inventory observations in Northeast Ohio, reach out to 415 Group today. We’d be happy to discuss your needs and devise a solution that ensures an accurate count.