If you are a business selling inventory, then you are sure to have come across some of the challenges it entails, but getting it right could be more important than you think. Accurate inventory affects the rest of your business…..from making sure you come through on promises to your customers to making sure your financial information is accurate.
The purpose of taking physical inventory is….
- To make sure the quantities in QuickBooks matches what is in your store or warehouse
- To make sure your cost of goods sold is properly recorded on y our profit & loss
- To provide better customer service by having accurate information
- To minimize theft and losses
- The IRS may require an accurate inventory report at year-end
When should an inventory be done?
- Inventory is typically done at the end of the year, but can be done more frequently
- As an alternative to a complete physical inventory, cycle counts can be performed
- Pick a time that will work for your business – for example, after close of the business for the day or on a weekend
Preparing for the physical inventory
- Careful preparation will achieve accurate results
- Create count teams consisting of a counter and a verifier
- Consider counting surplus areas before the scheduled big day – be sure and mark those items counted
- Make sure all orders shipped or picked up are finalized in QuickBooks
- Make sure all inventory that is being counted has been received in QuickBooks
- Make sure vendor returns are recorded in QuickBooks as bill credits or count them when taking inventory
- Make sure all inventory is properly identified
- Try not to fill orders or receive goods during the count process
- If the store has to remain open, have a way to account for items that are sold during the count process – a log sheet will help
Taking the physical inventory
- Print the physical inventory report
- As the counter reads the item and quantity to the person recording the counts, a sticker is placed on the items
- After all items have been counted, the counts should be entered into QuickBooks
- Run an inventory valuation summary report and review the results
- Alternatively, you can rent or purchase a physical inventory scanner which can save you time and make the task less tedious. This option requires barcoding of your merchandise, but makes the process much easier. AZ Retail can help you with barcode supplies.
Balancing the inventory
- Compare the total value on the inventory valuation summary to the inventory asset account in QuickBooks
Some reasons why they would not balance:
- Inactive items with quantities
- Transactions coded to the inventory asset account
- Inventory adjustments coded to the inventory asset account
Review your results
- After you are finished, sit down with everyone and discuss what worked, what didn’t and what could be changed to make things easier next time
- Place these suggestions in your inventory file and review them when it comes time to prepare for your next physical inventory
About QB Wise
QB Wise is a QuickBooks consulting company that offers a wide range of services. Our extensive experience in accounting, inventory management and information technology enables us to offer a full suite of turnkey solutions that are flexible and scalable – meeting the needs of any company – large or small.
Customers say their experience with QuickBooks is better when they work closely with a QuickBooks expert. By working with an Expert, you can rest assured that the software will be setup to meet the unique needs of your business. We will train you to get the most out of your software. You will become more productive and efficient and will have the confidence that your books are accurate.
If you are interested in learning more about taking physical inventory for your business or need help with your QuickBooks software, we would be glad to help. Call Nanci Savage at 702-498-7101.