Inventory — The Overlooked Asset

I’m not an attorney nor a CPA, but here are some facts I’ve learned over the years about the Business aspects of Inventory.

It doesn’t really matter what your CPA requires or suggests about your Inventory for your taxes, (they are probably right). Certainly follow their advice and be consistent from year to year.

But, your Inventory is the largest asset your business will likely have. You really should be tracking as much about your inventory and its performance as you can. If it’s just sitting around, its like cash in the mattress.

What is your Inventory ROI? (Gross Profit for a period divided by the average value of your Inventory). A higher return is better use of your cash (or credit.)

What is its turnover rate? (COGS for a period divided by Average Inventory value for the period.) This how many times your Inventory turns over or is consumed and replaced during the period. Higher turnover is better use of your cash (or credit).

What are you doing to improve each of these measures?

As for taxes, IRS Schedule C asks if you have inventory, then requires you do the calculation for COGS. The Small Business Taxpayer threshold for inventory exemption is $25M, not $1M. But, the inventory is only exempted from reporting if you class it as “incidental”. If you are doing anything retail, online, Amazon, or eBay, then your inventory is Not incidental, and must be properly accounted for.

(If you want to change how you do accounting to the IRS from prior years, then you need to submit a form 3115.)

If you haven’t already done so, Calculate your Ending Inventory value.

For Amazon Sellers, Run an Amazon Report / Fulfillment / Inventory / Monthly Inventory History for December for your ending FBA Inventory. Then physically count any of your inventory stored and stashed at home or your warehouse.

Add it all up times the cost of each – This is your Ending Inventory for last year, AND it is the Beginning Inventory value you will use for next. year

The COGS (Cost Of Goods Sold) calculation is very simple.

The value of your Beginning Inventory PLUS the value of your Purchases (of new inventory purchased during the period) MINUS the value of your Ending Inventory is the value of the COST of Goods Sold for section 3 of IRS Schedule C.

Watching your Inventory performance is just as important as managing your expenses, but gets less attention. Stale inventory doesn’t sell well. Paying too much for inventory makes it difficult to be profitable against lower-cost competitors. Inventory in your garage can’t sell. Money invested in inventory can’t be used for anything else.

Inventory is a Big Deal.

What questions do you have about Inventory?
John L

Amazon FBA eCommerce Management

Do More of What’s Working

Every now and then, you gotta take a look at what you’re doin’.

You gotta figure out what’s goin’ right, and what’s not.

When you figure out what’s goin’ right, do it some more.

Amazon FBA Attitude Entrepeneurship expense control Management

Clearing Out the Dead Wood

We don’t get much snow around here in Winter. A typical Winter for us has endless storms swooshing in from the Pacific and dumping rain, and rain, and more rain.

However, when the storms drop down from Canada, we get some snow, and brisk East Winds.


Don’t Miss those Important Dates

Your business runs like a clock, and uses a calendar. Important dates come and go.

When you hit deadlines, all is well, and you probably don’t notice.

But miss one?

BAM~ and you are in hot water.

i missed a date just last week. I let THIS Domain expire – without knowing it.

Oh man, did that hurt. I had thought I transferred all my domain registration to my main provider. I guess I missed this one.

It took about a week of calling somewhere to get it re-registered, and here we are, back up again

What did it cost us, besides the domain fee?

This direct site isn’t all that active, I’m sorry to say, so there wasn’t much lost here.

However, we host some of our eBay photos on this domain, so those items had no photos. We probably didn’t sell any of those items over the past week.

How do you measure what didn’t happen?

You don’t. We’ll never know.

What did we learn?

First, we learned that the reason we left that other hosting company was still valid. Their support and front office operations seem to be run offshore. We talked to “Rachael” “Mike” and “Lena”. But, they weren’t. The support response was friendly and polite, but relatively ineffective.

I’m glad we left.

Who are they, you say?

That’s for another posting when I can do some research on other hosts.

Secondly, I reinforced the need to put automatic ticklers in place for all, and I mean all, my important dates.

I screwed up.

We got over it. But, we can prevent future gaffes.

What are some of YOUR important dates? What will you do to keep them in front of you?

John L

Attitude Entrepeneurship Management

I Hope Your Guy Won

I really do.

That means you will have fewer excuses in the future.

What does the result of an election have to do with excuses?

It is easy to point to external circumstances as reasons why failure is inevitable or acceptable. The elected administrations areĀ  seen as the cause or the cure for the economic environment.

That environment is seen as the key factor in business success.

I say, No.

Yes, the macro or big-picture economy is important to business success.

But, unless you are engaged in the collapsing housing and mortgage markets, it isn’t as important as you fear.

Your business has customers and competitors.

Let your competitors cower in fear.

YOU take stock and chart a safe course through the tumult, and expand into their market. While you’re at it, take their customers, too.

You see, everybody makes their economic decisions, not on the general economy, but on their own personal circumstances.

Sure, the news on Wall Street will have impact on those decisions. But it is the bills in the mail, the price of gas, and the boss at work that have more impact.

So, whether your guy won or not should cheer or disappoint you.

But, don’t count on him (or her) to solve your economic problems.

After all. It’s YOUR business, not theirs.

Make your plans with alternatives to counter higher prices.

Decide how to plan for manpower.

Be creative and discover ways to better communicate to your market that you are still there and willing to help them out.

There will always be customers who are above the economics and will continue to darken your door.

You just have to keep finding them.

It is your business.

You have no business letting its success hinge on the decisions and actions of that guy in the Whitehouse – whether you voted for him or not.

Your responsibility is to make it work in SPITE of what goes on in Washington or your Statehouse.

You have commitments to meet, customers to serve, and employees who depend on you.

Don’t let them down.

John L