INVENTORY - Past, Present and Future

Inventory is the basis of your business. Control of inventory helps you to clean out items that are not selling from the past, it helps you know what you must purchase in the present to make merchandise to sell in the future. Knowing your inventory of both supplies purchased and items made gives you the power to control your money. Inventory is money.

The definitions of terms of inventory will be described more fully in this article, but read these, read the rest of this article, then come back and review the definitions.

Inventory Control -

A system designed to keep track of all materials. How much, how many in use, how many in stock, where in stock, and possibly rated as to age and/or conditions.

Book Inventory -

The amount of stock shown to be on hand by a perpetual inventory system, wherein sales, markdown, and discounts are deducted from total purchases to date.

Perpetual Inventory -

Method of keeping a constant calculated count "today" and "to date" of purchases, supplies used, items made, and sales, etc.

Physical Inventory -

Determining by actual inspection and count of the merchandise on hand in booth, boxes, and storage.

See Overview: Inventory Control for other descriptions of inventory.

What is inventory?

1. For the manufacturer (hand-crafted finished product manufacturer) it is the materials used in the process and in the completed product.

2. For the retailer it is the merchandise you have for sale.

How many of you purchase supplies, then glue, nail or sew them into a finished item? How many take the finished items to sell at a mall or show? In all likelihood you do both so, are both a manufacturer and a retailer.

Inventory is money. It is money spent to buy supplies, inventory is converted back into money when items are sold. It is money in items sitting idle on shelves in storage. At the end of the fiscal year, the inventory on hand is part of the business assets.

Inventory Financing from the website Idea Cafe's Financing Your Business has information about money and inventory.

Careful inventory control increases sales for profit by minimizing slow items that eventually are marked down to sell or scrapped because they are out of date, dirty or broken. The longer the inventory takes to flow through the business, the longer that money is tied up and unavailable for other purposes.

In addition to paper records of inventory, a physical inventory should be taken periodically to be sure quantities on hand equal those shown on paper inventory records. This means that you will look a every item stored or out for sale and physically count the items. Paper records are then adjusted to reflect any differences that show up in the physical count.

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