Inventory – what is it?
Inventory is the act of counting and recording your items in a business, typically for taxation purposes. It’s important to know when to do inventory because there are many benefits that come from performing it on a regular basis. Inventory also helps companies plan better and avoid costly mistakes like running out of stock or ordering too much. All companies with physical assets must keep track of their inventories!
Inventory – when to do it.
When you’re wondering about this, you might first think that there are two types: physical inventory and financial. Physical inventory is the process of physically counting things in a retail store or warehouse; on the other hand financial inventory can be done by adding up numbers on a spreadsheet. While both are important, physical inventory is the most crucial because it helps you identify your supply management needs and plan for future growth or shortages of merchandise that may be in stock at any given moment!
How to plan an inventory well.
There’s no one way to do this – while some companies might use Excel spreadsheets or accounting software, others might do this on paper or electronic inventory management systems. A general rule of thumb is to use the first-in, first-out (FIFO) system because it’s a more conservative approach that’ll help you avoid high costs and overstocking issues!
What companies must perform inventory?
While all businesses with physical assets must keep track of their inventories, some are more complex than others. For example, businesses that regularly buy and sell goods may be required to maintain a perpetual inventory system because the costs incurred from an error in counting would exceed any benefit derived by performing periodic inventories.
Advantages of inventory.
The primary advantage is that inventory reflects the current status of your company. It also makes it possible to plan for future growth and can help you avoid shortages at any given moment. Inventory is a vital part of business that should be performed on a regular basis!