As we approach the time to close the books, taking a look at your inventory is an item that to needs to checked off your year-end checklist – or added to.
The pandemic may have your attentions elsewhere, however, the way you manage and track your inventory could impact your financial statements greatly.
Cut back as necessary
Carrying too much inventory can reflect poorly on a business. Taking stock and perhaps cutting back on excess inventory reduces interest and storage costs. Doing so also improves your ability to detect fraud and theft. Yet another benefit is that, if you conduct inventory checks regularly, your processes should evolve over time — increasing your capacity to track what’s in stock, what’s selling and what’s not.
One improvement to perhaps budget for here: upgraded inventory tracking and ordering software. Newer applications can help you better forecast demand, minimize overstocking, and share data with suppliers to improve accuracy and efficiency.
Make tough decisions
If yours is a more service-oriented business, you can apply a similar approach. Check into whether you’re “overstocking” on services that just aren’t adding enough revenue to the bottom line anymore. Keeping infrastructure and, yes, even employees in place that aren’t contributing to profitability is much like leaving items on the shelves that aren’t selling.
Making improvements may require some tough calls. Sadly, this probably wouldn’t be the first time you’ve had to make difficult decisions in recent months. Many business owners have had to lay off or furlough employees and substantively alter how they deliver their products or services during the COVID-19 crisis.
You might have long-time customers to whom you provide certain services that just aren’t as profitable anymore. This will require your business to be looking to either find new service areas to generate additional revenue or expand existing services to more robust market segments.
Take a hard look
As of this writing, the economy appears to be slowly recovering for most (though not all) industries. An environment like this means every dollar is precious and any type of waste or redundancy is even more dangerous.
Take a hard look at your approach to inventory management, or how you’re managing the services you provide, to ensure you’re in step with the times. Your Rudler, PSC advisor can help your business implement cost-effective inventory tracking processes, as well as assist you in gaining key insights from your financial statements. Please reach out to us at 859-331-1717 with your questions and concerns.
RUDLER'S TAX MANAGEMENT & PLANNING TEAM
This week's Rudler Review is presented by Kendra Anderson, Staff Accountant and S. Gregor Lamping, CPA.
If you would like to discuss your particular tax situation, contact Kendra or Greg at 859-331-1717.
Rudler PSC has established a Tax Management and Planning Team, a group of professionals who specialize in tax services. These highly qualified and experienced tax specialists meet on a regular basis to discuss upcoming client engagements, current issues relating to our clients and regulatory changes. Be sure to receive future Rudler Reviews for advice from our tax experts, sign up today !