Do you own a business that carries large amounts of inventory? If so, you probably have times where your inventory levels are very unpredictable. A sudden boom in customer activity could leave you with little inventory on the shelves. Conversely, you may purchase a great deal of inventory expecting a lot of business, only to see it sit for long periods of time.
Running an inventory-based business can be challenging. No matter how much work you put into understanding your inventory cycles, there will always be times in which your customer behavior is completely unpredictable.
We consult with our clients to help them predict their necessary inventory levels as much as possible. We also work with them to turn excess inventory into a valuable asset.
At Smolin Lupin, we get to know your business inside and out. We work as a trusted partner and an extension of your team. This depth of knowledge helps us assist you with your inventory planning.
Here are a few ways to do just that:
The accounting method your business uses for inventory can have a significant effect on the company’s financial statements. Selecting the right inventory method is important as once a decision is made the business typically must continue using the same method. As inventory valuation directly impacts financial statements, it is important to be consistent.
Do you have excess inventory that you know you will never get rid of? Maybe the inventory was made obsolete by a newer model. Or maybe there’s just not the demand you predicted. Whatever the reason, that excess inventory doesn’t have to go to waste.
You can donate that inventory to charity. No matter what your product is, there is probably a charity out there that would love to have it. The great thing about donating inventory to charity is that you get a tax credit, not a tax deduction. A tax credit is always preferable to a deduction. A deduction only reduces your income, while a credit actually reduces the amount of taxes that you owe.
Note that if you claim inventory as a charitable deduction, that inventory cannot show up on your cost of goods sold at any point in the future. Also, if you are donating food, you will likely have to meet state and local regulations about the quality of the food that you are donating. Do some research into your local regulations before you donate perishable food items.
Of course, the best way to manage your inventory costs is to not keep much inventory sitting around. Although that can be hard to do, it is possible. We work with our business-owning clients to help them better understand their inventory cycles.
We look back through their past transaction records to determine when they bought inventory, how long the inventory sat on shelves and when demand for that inventory is the highest. We then make recommendations to them on when they should buy certain inventory and how much they should purchase. Inventory management isn’t a one time job, it’s an ongoing process. It requires constant monitoring and adjustments to keep your inventory levels lean.
Contact us for more information about how we can help you better manage your inventory. Our inventory analysis team would be happy to meet with you in person, review your inventory systems and discuss with you how we can be of service.