Inventory is one of the main assets on your balance sheet and one of the main headaches for a business owner. Keep too much on hand and you run out of cash; keep too little around and you alienate your customers with bad service. Inventory can consist of finished goods or raw materials and can be costed in a number of different ways. You can keep track of items with barcodes or stickers and tag them by row and column. You can lock your inventory in cages and install video cameras, but no matter what method of control you choose you are going to eventually have to resort to counting individual items (or pallets of items) to verify their existence. Once you come up with a count, you will be able to reconcile the value of inventory according to your count with the dollar value of inventory on your balance sheet. You are inevitably going to come up with differences between your count and the quantities listed on your Sage 50 physical inventory list. Here are some places to look for the cause of any discrepancies: Returns. Returned items may have been received into your warehouse without an entry in your accounting system. Be sure to enter returned items as a credit memo in Sage 50 to adjust both the customer’s unpaid balance and your inventory account. Timing difference. Purchased items have been received into inventory but you haven’t received the invoice from your supplier yet. Be sure to record the item receipt in Sage 50 and mark the “Waiting on Bill” check box. Update the item cost as needed when the final invoice arrives. At the end of each month, review the Purchase List to see any items flagged as “Waiting on Bill.” Quantity conversions. Make sure you are counting items in the same units as your inventory report. If you have items recorded as bottles but they are stored in cases, for example, you may have counted them incorrectly. Convert the items counted to the same basis as your report – be sure to review the “stocking unit of measure” displayed on the physical inventory list. (Sage 50 Distribution Accounting, Sage 50 Manufacturing Accounting, and Sage 50 Quantum Accounting all have unit of measure fields that will allow you to convert units of measure for different purposes.) Transposition error. If your quantities are off by an amount divisible by nine, you have transposed a number. Human error. You may have missed a section of inventory. Have a different person count the area in question. Ideally, inventory counts should be made at least once a quarter. They should always be taken as close to yearend as possible with any necessary adjustments made as quickly as possible. Look for trends. Be sure to take note if inventory adjustments are large, are growing at an increasing rate, or seem to occur in one type of item or section of your warehouse. You may want to segregate higher value assets and consider adding additional levels of control. Once inventory is under control, you can turn your attention to your second biggest asset – unpaid customer accounts receivable.
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