Inventory Management Is Especially Important This Year November 5, 2020 As year-end draws near, many businesses will be not only be generating their fourth quarter financial statements, but also looking back on the entire year’s financials. And what a year it’s been. The COVID-19 pandemic and resulting economic fallout have likely affected your sales and expenses, and you’ve probably noticed the impact on both. However, don’t overlook the importance of inventory management and its impact on your financial statements. Cut back as necessary Carrying too much inventory can reflect poorly on a business as the value of surplus items drops throughout the year. In turn, your financial statements won’t look as good as they could if they report a substantial amount of unsold goods. Taking stock and perhaps cutting back on excess inventory reduces interest and storage costs. Doing so also improves your ability to detect fraud and theft. Yet another benefit is that, if you conduct inventory checks regularly, your processes should evolve over time — increasing your capacity to track what’s in stock, what’s selling and what’s not. One improvement to perhaps budget for here: upgraded inventory tracking and ordering software. Newer applications can help you better forecast demand, minimize overstocking, and share data with suppliers to improve accuracy and efficiency. Make tough decisions If yours is a more service-oriented business, you can apply a similar approach. Check into whether you’re “overstocking” on services that just aren’t adding enough revenue to the bottom line anymore. Keeping infrastructure and, yes, even employees in place that aren’t contributing to profitability is much like leaving items on the shelves that aren’t selling. Making improvements may require some tough calls. Sadly, this probably wouldn’t be the first time you’ve had to make difficult decisions in recent months. Many business owners have had to lay off or furlough employees and substantively alter how they deliver their products or services during the COVID-19 crisis. You might have long-time customers to whom you provide certain services that just aren’t profitable anymore. If your company might start losing money on these customers, you may have to discontinue the services and sacrifice their business. You can ease difficult transitions like this by referring customers to another, reputable service provider. Meanwhile, your business should be looking to either find new service areas to generate revenue or expand existing services to more robust market segments. Take a hard look As of this writing, the economy appears to be slowly recovering for most (though not all) industries. An environment like this means every dollar is precious and any type of waste or redundancy is even more dangerous. Take a hard look at your approach to inventory management, or how you’re managing the services you provide, to ensure you’re in step with the times. We can help your business implement cost-effective inventory tracking processes, as well as assist you in gaining key insights from your financial statements. About KatzAbosch: Founded in 1969, KatzAbosch is one of the largest CPA and business consulting services in the Mid-Atlantic region. As an accounting firm, our mission is to provide the highest quality accounting, tax, financial and management consulting services to our regional clients. We understand the needs and challenges of our clients and we have made it our obligation to create, grow and protect asset value. KatzAbosch is consistently named a Best Accounting Firm to Work For in Accounting Today and has been named a Top 200 Accounting Firms in the Nation by Inside Public Accounting. Our firm is also ranked among the Top 15 Largest Accounting Firms in the Baltimore Area by the Baltimore Business Journal and a Top Workplace four times by The Baltimore Sun.