Year end inventory question

[threeputt]

Every year we inventory all materials. ie: substrates, vinyl rolls, application tapes, etc. All of this, of course in compliance with IRS and other taxing bodies requirements.

This year we're desirous of streamlining the process, making it simpler.

Would anyone care to offer how they go about this yearly task?

 

[Gino]

As much as I hate it, we only do the big items and let several little things fall through the cracks.

The only advice I can give ya is....... don't let anything else distract you. Meaning, don't multitask. Stay focused if only for two hours a day or after hours or whatever, just don't be answering phones, doing last minute jobs or talking with people about work.... other than counting things.
​

 

[Stanton]

Delegate and estimate.

If the IRS targets you, they will find something wrong no matter what.
It's what they do.

Pro Tip: give to left wing charities. IRS will give you a pass.



(joking hard)

 

[ddarlak]

change your accounting....

everything we buy is for a certain job, everything left over is considered garbage.

if we happen to make something of garbage, then we are recycling....

keeping track of vinyls and such is not really what the IRS is after.....

 

[FireSprint.com]

change your accounting....

everything we buy is for a certain job, everything left over is considered garbage.

if we happen to make something of garbage, then we are recycling....

keeping track of vinyls and such is not really what the IRS is after.....

+1

This is good for a small shop.

 

[CanuckSigns]

We also do a yearly inventory, it helped us out a great deal when we had our fire, the insurance company was able to see the dollar amount of inventory we had and it saved us a bunch of back and fourth in regards to getting a settlement.

Saying that, it is a bit of a pain, but we only count unopened, unused items, so full rolls of vinyl, full sheets of various substrates etc, if it has been used in some way view it as being paid for by the original job and what is left is "garbage"

with 3 people doing it, we can usually do the inventory in an afternoon.

 

[wildside]

We do not inventory anything. We expense it as it is purchased. Basically like what was just said, purchased for a job. Our cpa directed us to do this also. It would be a ***** to try to account for every foot of vinyl or grommet.

 

[rjssigns]

Our suppliers are close enough we practice JIT for raw materials. We keep bare minimum inventories on everything which cuts down carrying costs. Of course this method will not work for every business model.

 

[visual800]

in this economy we buy only what we need. Sure we have some stuff left over but I dont mess with vinyl roll estimating and all that. never saw the point in inventory estimating. My CPA has never required any of this

 

[GWSigns]

We operate purchasing by job as well. Any leftovers used on another job are recycling & gravy.

I have a less than popular spreadsheet I have to keep for each and every job - types of materials used, sales price, calculated sq footage, misc expenses, & labor hours. The formulated sheet then turns all categories into: estimates - actual = profit or loss per job.

The bean counters are happy and we do not have to do inventory.

 

[rmcginn]

IRS Pub 334
Inventories

Generally, if you produce, purchase, or sell merchandise in your business, you must keep an inventory and use the accrual method for purchases and sales of merchandise. However, the following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. These taxpayers can also account for inventoriable items as materials and supplies that are not incidental (discussed later).

1. A qualifying taxpayer under Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2.
2. A qualifying small business taxpayer under Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18.

Qualifying taxpayer. You are a qualifying taxpayer if:

• Your average annual gross receipts for each prior tax year ending on or after December 17, 1998, is $1 million or less. (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing by 3.)
• Your business is not a tax shelter, as defined under section 448(d)(3) of the Internal Revenue Code.

Qualifying small business taxpayer. You are a qualifying small business taxpayer if:

• Your average annual gross receipts for each prior tax year ending on or after December 31, 2000, is more than $1 million but not more than $10 million. (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3.)
• You are not prohibited from using the cash method under section 448 of the Internal Revenue Code.
• Your principal business activity is an eligible business (described in Publication 538 and Revenue Procedure 2002-28).

 

[threeputt]

change your accounting....
keeping track of vinyls and such is not really what the IRS is after.....

What are they after? It seems that inventory-ing is a specific requirement by statute set out in the IRS guidelines. No?