As if the end of the year weren’t demanding enough with rush shipping, holiday orders and vacation days, Year End Counts shows up. Even if you delay when it comes to record-keeping, you have to keep a record of everything at least once per year.
Year-End Inventory is the unsold stock your business has on the shelf and in the store room at the end of your book-keeping (accounting) year. Starting Inventory is this same number on the first day of your successive book-keeping year.
Important Ideas to Understand
Like many account concepts, Year End Counts has both an operational and an accounting side. In this article, we are mainly concerned with the operational side. For now, bear in mind that a correct count of your inventory is important for filing the tax returns for your company and that there are various ways to take this count and turn it into monetary numbers for your accounting. These vary from simple to more difficult, depending on the range of your business.
Inventory can also be counted once in a while, but continuous inventory counts are preferable. Usually, continuous inventories are kept by using computer software that tracks your inventory records and changes them whenever new goods become part of your stock or whenever sales are made. Computer software can vastly speed-up a year end count as you already have a starting number. Some inventory management tools will allow you to export and print your financial records so that you have a manageable sheet to start with. This changes the task to inventory reconciliation, instead of doing a new count from scratch.
When you are counting your stocks, you will need to count each SKU independently. This means that your red XS t-shirt is listed and tallied independently from the green XS T-shirt or the red XS t-shirt with extra stitching. These differences will be vital when adding-up overall costs.
What is cycle counting?
Cycle counting is the process of repeatedly confirming the accuracy of the inventory in your system by frequently counting a percentage of your inventory, on a weekly or daily basis, so that everything in your inventory is tallied at least several times per year. Some businesses started manual cycle counting earlier in the year, but it soon become time consuming for lack of systems.
Computerizing daily counts will:
- Increase operational efficiencies
- Help catch inventory inconsistencies sooner
- Increase inventory exactness.
An inexact inventory can cause out of stock items, which leads to late deliveries to consumers and the likely loss of business.
Focus on fast moving products, or expensive products, count by inventory ranking.
Review your adjustments and immediately define inventory to recount or submit your changes for inventory adjustments.
Tips to Help You Manage Year-End Counts
Set time aside: Dedicating time to just taking counts can offer breathing space and starts you off in the right mindset. That is, tallying inventory just takes some time. Find a slow sales day or dedicate fixed hours every day for a week to count inventory.
Embrace Technology: Allow technology to help whenever possible. This is easier if you have already adopted computer software that controls your inventory. Trade and print your digital records to create a beginning point for your inventory count. If you have been keeping outstanding records throughout the year, your work will be more about checking for accurateness than doing new counts from scratch.
Consult professionals as required: If it gets difficult, don’t be afraid about contacting a professional. While you possibly take pride in all the hats you can wear as a small business owner, do not be afraid to contact a certified accountant when you need an expert’s opinion.
Year End Counts is a count of the items you have in the stock room and out on shelves. This count is used to calculate exact totals for your business tax returns and for your book-keeping. While the counting process may be tedious, good planning and computer software prevent it from becoming overwhelming.