Tracking Inventory

Take an inventory at the end of the month, and then make sure you do it at the end of EVERY month.

a.       Inventory only those things that are part of the finished product, whether you made them or not.

b.      There will be 3 categories:

1.       Finished Product:  Actually done and waiting to be shipped

2.      Work in Process: Some Stage of assembly or a sub assembly you’ve put together or worked on but isn’t done yet

c.       Raw material:  this would be something you’ve purchased from the outside and haven’t changed yet.

Create a spreadsheet, count each of the parts on the last day of the month, then decide on a value and make that value consistent month to month.  The value should be based upon COST:

a.       For a part you bought that’s easy—whatever you paid for it

b.      For work in process, it would be the cost of what you paid for it + the amount of labor (at cost) you’ve got into—for this use whatever hourly rate you’ve paid someone in the shop—I’d pick an average of everyone and just use that—keep it simple.

c.       For finished product, take out your perceived profit margin.

Then is the easy part—you put it in Quickbooks.

The reason for doing this is so that you line up your costs and revenues and profits on a monthly basis.

JRI Consulting, LLC