2016-11-21 00:00:00InventoryEnglishChecking your inventory monthly can help you determine whether you have the right amount of inventory to keep your company in good shape.https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/03/Business-Owners-Should-Analyze-Inventory-Status-Monthly.jpghttps://quickbooks.intuit.com/ca/resources/inventory/analyze-inventory-status-monthly/Analyze Inventory Status Monthly

Analyze Inventory Status Monthly

0 min read

You want to check your inventory regularly to hold the right level; a monthly analysis of your inventory level should suffice. Holding too little inventory risks missing out on future sales, which may never be recovered as your customers turn to a competitor. However, if there is too much inventory on hand, you have tied up capital and risk the goods going stale or becoming obsolete.

One way to check how often you need to replenish your inventory is to calculate your inventory turnover ratio. This is simply your cost of goods sold, which is obtained from your income statement, divided by average inventory, or the starting inventory plus ending inventory divided by two. You can compare this to your historical number and the industry to determine if you are meeting your objectives. Your inventory turnover can also be compared to your sales projections.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

All You Need to Know About eCommerce Bookkeeping

Opening an e-commerce store is an exciting venture for any entrepreneur. With…

Read more

Differences Between Perpetual and Periodic Inventory Systems

The two main types of inventory systems give a small business flexibility…

Read more

Minimize Inventory to Decrease Costs and Free Up Working Capital

Your warehouse is full and business is booming, but there can be…

Read more