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Three Ways to Prepare Your Inventory for the End of 2014

As the end of 2014 approaches, your small business is likely focused on a number of different objectives, including holiday sales and closing out your books for the calendar year. Inventory impacts many of these year-end objectives, and as you prepare for 2015, consider these three tips to ready your inventory for the end of the year: 1. Maintain accurate inventory counts for fewer year-end write-offs The holiday season is the perfect time to get rid of slow or non-selling inventory though the process of write-downs. Although you take a hit when you write-down inventory, write-downs are preferable to write-offs, and clearing out old merchandise can help your business avoid writing off large amounts of non-selling inventory. Keeping accurate inventory counts allows you to not only make educated decisions about when to write-down inventory but also avoid extreme write-downs and costly year-end write-offs. 2. Conduct a year-end, inventory audit Small business owners are responsible for continuously managing inventory. The end of the year is the perfect time to verify your physical inventory matches what is reflected in your records. Inventory discrepancies usually occur from receiving errors, breakage, or theft. It is important to take the time to note any obsolete or damaged inventory and reduce its valuation. You should also take time as part of your year-end, inventory audit to correct the numbers as to avoid having errors accumulate over time. Unaddressed accounting errors can lead to your business being audited or unexpected out-of-stock conditions. 3. Run an inventory check Running an inventory check may reveal additional tax deductions if there has been a drop in market value of your inventory. This depends on your accounting methods, so it’s best to check with your accountant. According to tips from the IRS for small businesses and the self-employed, “Most taxpayers use the Lower of Cost or Market Method (LCM). The LCM method is the same as the cost method (which simply requires inventory to be valued at its acquisition cost), except when the fair market value of the merchandise drops below cost.” In this case, if cost cannot be recouped because the “market” has fallen below cost, the business is allowed to recognize the difference, even though the loss has not been realized. Although there are a number of ways to prepare your inventory for the end of the calendar year, a strong understanding of your inventory will help your business operations all year long. Implementing an inventory management system – like Wasp’s user-friendly Inventory Control software – can help eliminate common inventory problems, including inaccurate inventory counts, all year long. Ready to get control of your inventory in 2015? Try Wasp’s Inventory Control for free now!