How Many Guys Carry Inventory On Their Books?

Mike Finley

How many guys carry inventory on their books?


If you buy things by the case and use them over the course of many jobs you have inventory. The IRS has special accounting rules and procedures for handling inventory.

How do you handle this? Do you keep inventory on the books? Do you expense the case to one job? Are there some tricks of the trade?

MattCoops

strongly recommend Microsoft's Small Business Accounting.
It is a beefed up play off QuickBooks. And you can upload all your quickbooks data into the program.

Accounting software has inventory management system held within it.

And you can print custom invoices after you sell the stuff too.

good package

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Matt with Cupan Custom Tile & Paint of Lowell, Massachusetts
Design and installation of ceramic tile and natural stone for floor, wall, and countertops
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MattCoops

you should keep petty cash records too
they have these pocket size booklets you can carry around next to your schedule, auto mileage, biz cards,

damn, I need a briefcase

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Matt with Cupan Custom Tile & Paint of Lowell, Massachusetts
Design and installation of ceramic tile and natural stone for floor, wall, and countertops
(978) 601-8774 | cupantile@gmail.com | view tile pictures and more

osborn

Matt- Do you need microsoft office to get this?

Mike Finley

From the lack of responses, I'm gathering that either nobody realizes that they are carrying inventory, everybody is buying one thing at a time, or nobody cares?

ProWallGuy

Mike, I care. I buy some things in bulk, like brushes, roller covers, sandpaper, etc. Mainly sundries. I have pondered how to keep track of it, but it is still way over my head. I probably need my accountant to help me set something up in QB, but have yet to do anything about it.

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ARCS

I do not carry inventory on my books, it is much easier to cost out immediately, but one thing keeping it on the books does is makes the company look better from a financial statement. If I had 25,000 dollars or more worth, I probabaly would want to show it, but a couple cases of nails, and some odd and end lumber are really not worth it to me.

Mike Finley

This is the case for me right now, I just cost it out on a job, yesterday I bought a case of shims, got 400 shims sitting in the garage that will probably take a year to go through, cost them out on an open job. That's what the accountant says to do right now as long as we are talking small stuff like that.

But I would like to get to the point of taking advantage of not just bulk pricing, but just having inventory. Like for an easy example, we install a Kohler Cimmaron toilet 99% of the time on a bathroom remodel, every job we have to go and get all this stuff, it sure would be nice to eventually buy 20 of them at a time and have them on hand, or even just regular materials like sheets of drywall or denshield, even 2x4s would be nice so you could have a supply of straight and dried out ones.

Danahy

I do not carry an inventory as a rule. (said with exceptions)
Since most business fail due to cash flow, I've decided to not pre-buy or carry inventory, rather to just keep the money as a buffer.

The exception to this, would be when suppliers have a crazy low price deal going for something that I know I will need. I will just go prepay for it, and leave it at the store... I'll pick it up when I need it. Something would have to be an extremely good deal for me to do that though....

In a situation of having a bunch of certain products sitting there waiting for me to use vs. a pot sitting there in case of an emergency, I'll take the second.

I think buying in bulk and costing it out job by job is an awesome way to improve your financial situation, if you are slightly larger sized company, and or you already have a decent buffer built up. It's alot of work, but can really pay off later on.

Sometimes I think about paint costs... Saving $5 dollars on a can of paint (same paint, just different price due to sale or something), can be beneficial when it comes around. Let's say you can paint a gallon an hour, that would be like a $5/hr raise! It's great when it happens. The buffer needs to be there first though.

Perhaps another thread would be size of buffer? week / month / two?
Personally I have a two month buffer, but would like to see it to about 4 in the short term, then perhaps 6 within a year or so.

When I hit the 4 month buffer, I'll definately switch my interests into bulk buys and such to help refine my business... For now it's still the "just in time" method...

I suppose it just depends on where you are at....

George Z

Paint contractor cost of sundries and paint is about 12% of sales.

What savings can be realized by buying in bulk escapes me.
The additional overhead cost of:

looking for the deal
Ordering it
purchasing it, loading-unloading it
Keeping it warm (paint in cold climates)
Storing and keeping inventory etc.
Tying up cash

It is not worth it for us, we charge it to the job, sometimes creatively.
There is even a known large Paint Contractor that includes paint cost
in the hourly charge.
Year after year the percentage is about the same, I am thinking, why not?
Why even complicate the proposal process?

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Mike Finley

YOu painters!

What you say makes sense. Unfortunately on some jobs I have had 4 pickup truck loads of materials. On average it is usually 2. How all that crap fits into a bathroom is mind boggling sometimes.

ProWallGuy

I agree with all points here, but I still buy in bulk for items I need all the time. How much time/$$$ do I save by throwing a 5 or two of paste into my truck at the shop, compared to driving to a store and getting it? Probably quite a bit over the long run. I use literally hundreds of gallons of BM Muresco ceiling white every year. I buy this in 50 or 100 gallon lots. I save money on price, and save more on time. Its right here, no need to go pick up.

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George Z

That's why IKEA makes money

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George Z

It makes sense for that except we get lots of requests
for cloud white, decorator white, oxford white etc for the ceilings
and how would you charge it to the job?

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PressurePros

We use a wood/deck sealer that we custom tint in the field. We have to buy this from out of state so it just makes sense to inventory it. It's simplest for me to use cash method accounting. When I pay the material bill it is an immediate deduction. When a job is performed (and paid in full), the materials used from my inventory are marked up on a percentage and that is reported as income.

So far my fledgling coporation is a money loser. But if and when that fateful day comes that PressurePros, Inc makes dividend producing income, buying in materials at the end of a fiscal or calendar year makes sense to lower the tax libility.

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Roof Cleaning Services PA

dirt diggler

I just don't keep an inventory of materials. No reason to I guess

at the same time, I haven't ever sat down and figured out if it'd benefit me or not

Mike Finley

This I think is one of the issues that isn't as it seems and why I raise the question about it on the books. I'm pretty sure that no matter if you are cash or accrual that the inventory becomes an assert and you can only expense it as it goes out the door. For instance you buy 10,000 worth of something and you can only deduct it as it goes out on individual jobs. Now I could be wrong on this, but I think that is what is so much of part of the head ache with carrying inventory, it's keeping track of it all. You really have to have a system to monitor it as it gets used and it has to be entered into your accounting system as it gets used up.

AirPro

I have a "truck stock" X2 which is in all actuality inventory. It is an asset and gets catagorized as one until a part is sold....my accountant figures out the rest.