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With recent news reports warning small business struggles will continue, improving clarity on inventory management is revealed as an important issue by ABN's Bookkeeper Radio.
Over 500 ABN members tuned into the recent broadcast of the Australian Bookkeeper Network (ABN) Bookkeepers Radio program on inventory management.
In the wake of EOFY news reports about a continued small business downturn, the interest shown by ABN members to seek more support to manage inventory signals this as an area important to reduce risks and protect clients.
In an interview with Simon Jupe, Managing Director of inventory management software Fishbowl, ABN Directors, Peter Thorp and Kelvin Deer, highlighted the significance of the issue.
“We all know how important it is to ensure the accuracy of your inventory figure,” said Peter. “Inventory is typically one of the most substantial numbers on your balance sheet and as a result can have a significant profit effect, as well as the income tax consequence thereof.”
Acknowledging Peter’s comments, Simon raised issues that businesses have in managing their inventory well, especially at tax time.
Difficulties drawing a line in the sand of goods in and out
“One of the areas overlooked in stock takes are where there is stock in transit,” said Simon. “What you’ll find is that business owners talk to suppliers with requests to invoice before or after the 30th of June, where you’ll have in some cases stock received and invoices not sent or vice versa.
“A lot of the smaller businesses use existing accounting software packages that don’t deal with goods received and not yet invoiced or invoices received but not yet sent, so that’s effectively not run through to the liability on the balance sheet tied directly to the accounts payable,” said Simon.
Consequences dire from mistakes of poor inventory management
At a time where small businesses can ill-afford to make mistakes, Simon urged a proactive approach to leveraging better tools and systems. Simon acknowledged that sadly the more common approach is to wait till significant loss has occurred.
“We had a client who was selling salad dressings and couldn’t work out why they were having issues,” said Simon. “It was only when they started using Fishbowl that they realised that over the previous 6 months they had added close to half a million dollars in extra stock to the recipe that they hadn’t needed.”
“Another business who sells packaging material were using an Excel spreadsheet and when they switched to our more efficient system and did a thorough stocktake they realised they had $60,000 of extra stock they didn’t know they had,” said Simon.
Further support on offer
An hour of conversation with Simon on Bookkeeper Radio brought with it a raft of advice on methods of stocktaking and issues to watch out for. Bookkeeper Radio is available to ABN Members. The ABN invites you to become a member today. You can view the recording of the session with Simon here.
Also, as an ABN Member you will be entitled to exclusive deals on Fishbowl Inventory solutions.
You can also meet members of the Fishbowl team on the 10th to the 12th of October at The Bookkeeper Event, being hosted by the ABN in Adelaide’s prestigious Hilton Hotel. Buy tickets today.
To learn more about Fishbowl directly, visit their website to book a demo today.
