Keeping Track of Inventory in Business Operations

Why Do I Need To Conduct A Inventory For My Business?

Whether selling goods or producing a widget, keeping track of raw materials, production in progress, or goods available for sale is crucial. The best way to keep track of things is to implement a inventory management system. For manufacturing, large wholesale operations, or large retail operations, inventory management can be complex and most likely will require a computerized system to help with this task. For small businesses the inventory process can be as simple as using a spreadsheet.  Regardless of your business size, keeping track of inventory helps with channeling time, energy and resources and ultimately translating into profitability.

What Types Of Inventory Should I Use In My Business?

Which type of business you have will determine what type of inventory system to use. Inventory can be valued in one of three ways:

• First In First Out, known as FIFO
• Last In First Out, known as LIFO
• Weighted Average

Start your inventory computation and valuation by counting your stock on days when you are closed or at night when nobody is around; this will help you obtain a good starting point. To find out how much you have invested in your inventory, assign a cost figure to each item and then total all item values to come up with a total inventory figure. To keep track of your inventory fluctuations add-in any new items and subtract any items sold; this should give you a net inventory amount at a certain point in time. Repeat the process until you are ready to conduct another physical inventory count.

Conclusion

Keeping track of inventory is essential in a business that sells or manufactures goods. By comparing inventories from one period to the next, a system of checks and balances can be implemented so as to ensure that you have sufficient products on hand to meet customer demands and to keep control of waste and potential fraud.

Establishing inventory frequency will be driven by your type of business. Implementing a inventory system can be time consuming so check with a tax professional or a professional who is savvy in inventory controls and implementations, you may find this to be a great time-saver.