Dealing with inventory is the trickiest part of accounting. It is imperative that you match the sales revenue with the purchase costs that relate to those specific sales for your accounting reports to be accurate.
If you have an accounting system that handles inventory you’re well on the way to accurate reports, but I’ve found that many businesses don’t have this and as a result, their accounting reports are not showing their true gross profit and net profit.
My top 3 tips for dealing with inventory are:
Add doing a stocktake to your end of month checklist and do it without fail. Create a list of your inventory items and manually count how many you have on your premises on the last day of the month. Ideally, create this in a spreadsheet so you can enter the inventory count. This will then automatically calculate the value of your inventory.
The reason for this is that if you’ve purchased stock in a...