5 Tips to Help Keep Track of Year-End Inventory

Taking a year-end inventory for your small business is necessary to calculate profits and any losses, and having stuff on hand means you paid for it with expenses. All of these calculations are needed when you file your annual income taxes as a small business owner.

Try these five tips to make your inventory counting easier.

Take a 'Day Off'

Depending upon the size of your small businesses and the number of employees you have, you can take inventory one of two ways. Perhaps you can close your business on a historically slow day and dedicate that day to inventory. The Monday after Christmas, Christmas Eve, or even New Year's Eve are possibilities.

Having your business closed even on a slow day means possibly losing customers. Another option is to have employees take inventory during hours when your business is normally closed. Paying them for extra hours of work can be a bit cumbersome if you have dozens of people. However, if you calculate how much money you will lose by being closed, then it may be worth your while.

Make inventory day more informal. Buy pizza for everyone. If possible, allow your employees to bring their kids and spouses so they can spend time on the holidays with their families. Make it a more relaxed day, as taking inventory is already a tedious process. You can even make it like a party, such as this example from the city of Atlanta when it needed help to inventory bike lanes across the metro area in the summer of 2011.

Automate

Accounting software is great, and it will give you a rough idea of what to expect on inventory day. Yet, you still need to have an exact number (or as close as possible) for income tax purposes. The cost of goods sold, any profit, employee wages, and inventory at the end of the year are all used to figure your profit or loss at tax time.

Automation goes beyond just accounting software. Adding barcodes to your items and then using scanners can making tracking items faster. Locating items faster saves time and therefore money when you compile your end-of-the-year statistics.

Keeping a database record of all deliveries and sales can also help. Counting unopened boxes or crates that are labeled, barcoded, and put into your database will help keep counts at the end of the year. A clearly marked row of 10 boxes high on a shelf no longer has to be brought down and inspected if you take great notes on your computer. All it takes is a few extra minutes to save hours of inventory time later.

Do It Yourself

If you really want to save money on paying employees, you can inventory items yourself. Especially if you've automated your system and your business is small enough, you can try to accomplish inventory gradually over a few weeks in December. Staying an extra two hours to take stock of your back rooms might be done easily enough with just yourself and the aforementioned trusty scanner.

Doing inventory yourself as much as possible keeps employees at home and prevents having to close your business for a whole day. If you can swing it, get as much done without extra expenses aside from your own time.

Remember Everything

Everything must be accounted for when you inventory your business. That includes items that aren't bought and sold. Machinery, supplies, stuff to run the machines you own, new equipment added this year, and anything bought to add to your shop or storefront should be included. If you bought a $10 flower pot to go in your foyer, that's a expense that should be added to your inventory.

The aforementioned barcoding can be done on stuff that isn't sold as well. That way, at least you have a record of it. Adding a date stamp to the time and day you bought an item and added it to your office will help - that way you can show when it was bought. Saving and even scanning receipts for such items into your computer will further automate the process and save valuable time later.

Be Thorough

Inventory can be an exhausting process. Find a balance between efficiency and thoroughness that can get the process done as pain-free as possible. Even knowing your employees can help in this regard. Workers who can lift heavier objects can retrieve boxes, while others can count individual pieces.

It may take a few years to perfect taking inventory. Don't fret if things don't go as planned. If you start getting stressed, so will your employees. Even if your inventory doesn't go as expected, try to stay focused because the end goal is what is most important when taking stock of what you have on hand at the end of the year.

More from William Browning:

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