The end of the year can feel like organized chaos for salon owners. On top of a busy season of serving customers, there are financial statements to collect covering sales, sales tax, and payroll; income statements and balance sheets to review; and tax forms to file. Taking stock of the inventory you will bring into the new year may seem like a mundane task, but it is a critical one.
A mistake in your ending inventory count impacts more than you may think – it overstates or understates net assets, income, and equity. Following are tips to ensure an error-free ending inventory report.
Formula For Success
First, follow this formula to accurately calculate ending inventory: Beginning Inventory (what you started with) + Net Purchases (additional purchases, with discounts or returns removed) – Cost of Goods Sold (COGS) = Ending Inventory.
Second, commit uninterrupted time to inventory reconciliation. In addition to counting what was not sold, this is a good time to consider discontinuing any items you no longer intend to sell and finding new items to add next year.
Clear All Transactions
Before you are ready to begin year-end inventory counts and valuations, check your accounting software to ensure all transactions have cleared. Are there any paid orders that have yet to ship? How about items that sold but were out of stock at the time? Order and fulfill all outstanding paid transactions as soon as possible.
Count and Report Inventory
Now you are ready to manually count the unsold inventory that is leftover. Manual counting should be completed alongside a review of transactions from your accounting software or sales from your salon management software. The goal is to spot any errors before it is too late.
If you are using TanTrack, Inventory Worksheets can be printed out by brand, category, manufacturer, or supplier. Use the list of item names and SKUs to check actual inventory against what is listed in TanTrack. Use the blank line on the worksheet to report the quantity as you manually count.
Review each item on the Inventory Worksheet against your inventory level report and adjust in TanTrack as necessary. Take note where levels on hand do not match reported levels. This can indicate incorrect counts, stolen product or an accidental sale of the wrong item during the sales process.
Finally, run the corrected versions of your reports for your tax records.
Create an Ending Inventory Report by 12/31
TanTrack users have access to automated inventory reporting, which is especially helpful at the year’s end. However, inventory reports will only show values as of the date they are run. Run a final inventory report at closing on 12/31 (after the last sale of the year), or at opening on 1/1 (before any sales in the new year).
All reporting available through TanTrack – sales, sales tax, payroll and inventory – was designed to be submitted with your tax records. Talk to us today to learn how TanTrack can streamline your reporting and sales year-round.