How to Manage Inventory
Here are some ideas on how to manage inventory.
1. Consider the Costs of Storing Inventory
2. Safeguard Inventory
3. Appropriate Mix of Inventory
4. Timing of Inventory Purchase
5. Managing Purchase Function
Are you managing your purchasing function? As a result, devoting appropriate resources to purchasing can save money on materials and parts for resale. So, negotiate the best price and buy in bulk when appropriate.
6. Inventory Management System (Managing Inventory)
Beginning Inventory + Purchases – Sales or Transfers = Ending Inventory
7. Investigate Differences
8. Assess Inventory Costing Function
Assess your inventory costing function. Depending on the sophistication of your accounting system, inventory transfers may not be handled well for costing purposes. Another common inventory costing problem is invoicing from a negative inventory book balance (sales were recorded before purchases.) In cases like these, inventory costing will be incorrect. Furthermore, a way to correct for an inventory costing problem is to count physical inventory at period end and adjust the value on the balance sheet. The offsetting entry is to cost of goods sold; therefore, this entry should correct both the income statement and the balance sheet.
If you want to better manage your inventory, then click here to access our free KPI Discovery Cheatsheet.
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