End Of Year Stocktaking/inventory - Advice Wanted

[UKRay]

I'm just about to do an inventory for my end of year accounts and wondered if anyone had any advice or suggestions to make the job any easier (aside from getting someone else to do it!). This task is a pain in the a** that affects most small (and large) leather businesses and I'd like to see if sharing information and knowledge can make the job less of a hassle for all of us.

Do you use printed (hard copy) stock sheets? Excel spreadsheets?

If you use stock sheets or a database did you make 'em yourself or buy 'em in? How do you set them out? What info is important and why?

Have you got any tips around stocktaking you can share?

Do you think it is better to have a large inventory or a small one (aside from the time it takes to count all the stuff!). Why?

Any advice would be gratefully received,

Thanks guys.

Ray

[KAYAK45]

First to have to answers some questions, then I can help

Why are you taking an inventory?

Taxes?

Insurance?

Banker?

Wife wants to know? LOL

You want to know if your running your business correctly.

The degree of accuracy needed, or desired is dependant on that. It costs money (time) to collect information. How much of your time are you willing to 'PAY' for the reasonable estimate of your inventory value

Then how do you value it.

Replacement cost?

Resale value? as is where is?

Future use value?

Cost you paid, including shipping and handling and insurance and storage?

(FULL ABSORPTION INVENTORY)

I have been involved with inventory questions my whole business life as a CPA AND manufacturer.

Get back to me and I'll try to help.

Kevin

[UKRay]

Kevin,

Many thanks for the offer of help.

It is requirement for my business tax return that I carry out a stock taking, but I'd also want to do it to find out the value of my business assets. Obviously this has an element of 'running my business correctly''.

The insurance element is one that I have been considering for quite a while as I'm fairly confident I'm under-insured.

The next section is harder as I'm not sure what the best way to value the stock might be. My instinctive reaction is to value it 'Resale value - as is where is' but this may not be the most useful information to have - advice would be most helpful.

Replacement cost would be significant.

Future use value probably applies to my machinery and tools, but many of my machines (due to age and availability) are virtually irreplaceable. Does this mean they are worth lots or little?

Ray

[KAYAK45]

Ray, I can help with some of this but you will need a local chartered accountant to answer some tax questions for you. I know nothing of that side of the POND

Yes, insurance is a very good reason to value your equipment tools and inventory.

Let's start with definitions and I would want to seperate equipment and tools from INVENTORY.

Inventory, to my thinking and experience is best left to supplies and raw goods used in the production of property for sale.

Leather, thread, maybe lasts, definitely dyes and glue and nails and pegs et. etc. etc.

Tools do not of necessity get USED UP in the manufacturing process.

The same is true equipment.

Again I do not know of the tax ramifications on those types of items.

Especially for insurance you need a record of those items to justify a claim, if needed. We recently had a member in Florida lose his tools and everything else in his barn from a fire. My God what would it cost to replace my Barnsley, Rose eTC. knives, Cases of Misc. tools and buckles. No insurance company would take my WORD for it all.

Equipment is easier I thin and should be maintained on its replacement value for insurance, if you can afford that.

So let's call inventory supplies and raw goods.

To simplify I would suggest you divide your items into "A,B and maybe C" items. Expensive leathers, full spools of thread, full bottles of dye ETC. are "A" and will be measured carefully and valued. Next are quantities of say rivets and buckles and needles etc. that are "B"s and any good effort method of valuing will do.

Last are open bottles of glue dye shoestrings etc. I hold up my thumb and SAY....about $one thousand or so. If that amount does not change much overt the years, and it shouldn't. Don't count it carefully.

Gotta go for now. be back later

Kevin

[UKRay]

So where do you place finished (ready for sale) goods in this equation? I can't ignore them as they represent around 60% of the value of my business.

Ray

[TwinOaks]

Ray, that may need to be a separate category, and the A,B,C method above be used for raw materials.....or rather: CLASS 1, category A: New material- you should have receipts for all of it. Cat. B: Used material- remnants, scraps, and small pieces of leather. Cat. C: Consumables - your thread, dye, finishes etc.

Class 2: Finshished goods.

Class 3: trash - which needs to be accounted for in some manner. Most large retail companies have a "claims dept" that sort that out.

[UKRay]

Thanks, Mike.

This is all getting very complicated!

Ray

[Luke Hatley]

Thanks, Mike.

This is all getting very complicated!

Ray

I'm so glad that my Leather Work is a "Profit Loosing Hobby".................

[UKRay]

That might be okay for you, cousin Luke, but I'm keen to ensure mine doesn't go the same way. LOL

Heck, I'd have to get a proper job again and we can't have that... anyway, I'm unemployable!

Ray

[KAYAK45]

Good afternoon or whatever where you are. Sorry I was away from my keyboard so long.

Sorry this all gets a bit confusing, but this is why whole college courses and scores of books, nay, hundreds of books are written on the subject.

It is also why here in the colonies most small business' use the CASH METHOD and simply expense everything when paid.

Why? To use someone elses methods, at great time and expense, to end up with a SWAG!l LOL, but it's not funny.

Let me back up a bit from the details and address what is trying to be accomplished. Hope you don't find this too boring.

What we are attempting is to get a REASONABLE APPROXIMATION at any point in time for the value of goods. No bookkeeping system is ACCURATE. It is only REASONABLE.

To that end, any system that is Systematic (having any kind of system) Logical (can be explained) and Not Subject To Manipulation (uses the same methods without regard to outcome) is acceptable accounting.

I had not got to finished goods in my last discussion. And will NOT EVEN GO CLOSE to work in process for this case.

I do not have a finished goods problem, almost all my work being bespoke. More questions to you.

Does your inventory of finished goods vary greatly from period to period or by types of items?

They could vary greatly during a period but return to normal. Say a buildup for fairs in August, but the sell-off brings them back?

I need to hear more on how you business model works, I think.

E-mail or PM and lets start a dialogue.

Kevin

[KAYAK45]

Ray, on the subject of your tools and machines.

I have my machines valued for insurance at what it will take to replace the functions each serves, not the same make and model.

In addition I was once told "Insurance is to protect you from a check you cannot write". I can replace my singer 31-15, if struck by lightning. I can probably recover my sewing machines and skivers from a flood. But if I had a fire I could not afford to by a new CB4500 and landis 12l AND 111w-155 and 31-15....... My point on insurance is to think of the losses you can handle, and insure the others.

Mine are not covered for theft for instance. Anybody who can carry my landis 12 out is welcome to it. That also goes for the landis 400 line finisher LOL.

I do have a video of all hand tools and supplies, inventory, to justify my GROSS VALUE GUESS of $25,000 for catastrophic loss.

Let's here some other ideas on this one.

Kevin