Taking Inventory is an important practice for all businesses, regardless of whether you’re in retail or a service-based industries. We all know that in retail, wholesale and manufacturing environments taking inventory is a vital part of your year-end practices. However, taking inventory in a service business is just as important.
What should I inventory? Your company-owned office equipment, computers, telephones, hard-drives, work stations, furniture, company vehicles are all assets that should be inventoried. (Counted and assigned a value.) These assets should typically listed on your balance sheet as “Furniture, Fixtures & Equipment” (FF&E) or something to that effect.
Why should I take inventory? Consider that most all of your business assets depreciate over time. This depreciation is a tax deductible expense to your company.
When should I take inventory? While you should be tracking your inventory and/or company’s Furniture & Equipment assets on a regular basis, it’s always a great idea to document all of the assets at the end of the year.
Where should I start?
- Start with a list of the assets your company began with at the beginning of the year. If you don’t already have one, you can simply create one by reviewing the transactions within your FF&E account from your balance sheet (or chart of accounts) and list them within a spreadsheet.
- As you go through your assets, be clear about what items have been sold, trashed, donated, or used as a trade-in for an upgrade. This is important info for your CPA to know if these transactions aren’t documented properly within your bookkeeping.
- List any new assets acquired (the date of purchase and purchase amounts are always helpful).
- Finally, organize and save this list and provide it to your CPA along with other financial reports for tax prep.