The holiday season is a time for celebrations, decorations, family and friends. With just over 100 days until Christmas, it’s time to start planning your Parts Inventory. If you run a dealership, the holidays are also the perfect time to perform your Parts Department Physical Inventory, because the Parts Department should not be open for business during the physical inventory. We recommend the pre-inventory steps below, which will make your inventory process more efficient and accurate.
Pre-Inventory Procedures
TWO MONTHS PRIOR:
1.
Purge inventory system of all bin locations that are no longer in use.
2.
If performing a manual count, organize ALL parts listed on your count sheet in the same order as the parts in the bins.
3.
Part numbers with 0 on-hand should NOT be deleted.
4.
Locate all parts in their proper bin locations prior to the count and listed on the computer with the correct location being listed.
5.
Cycle count all bin locations
at least one time prior to inventory and adjust. Keep track of adjustments by part number and notify accounting of any adjustments that would impact the GL.
TWO WEEKS PRIOR:
1.
Return or dispose of all damaged or scrapped parts. Remove them from general ledger. Identify damaged/obsolete parts and separate them from the inventory. Review packaging to make sure they are in returnable/resalable condition. Used parts should be separated from inventory and noted as such. These can be write-in items. If overflow parts are kept in multiple locations due to physical space limitations, ensure that count teams will have adequate directions to those overflow parts.
ONE WEEK PRIOR:
1.
Run bin checks for all bins and check the printouts to ensure that:
- a. All bin locations no longer in use have been purged from the system.
- b. All part number costs agree with the current price file.
- c. The parts on the count sheets (if manual counting) are listed in the same order as they appear in the bins.
- d. Begin verifying negative on-hand quantities and adjust to actual as needed (this should be done daily).
- e. Begin verifying parts with quantity on-hand that have no bin location and record all current bin locations in the system.
- f. Verify all multi-bin locations to ensure that parts are in both bin locations. If not, adjust inventory locations as needed.
2.
The final inventory pad should be prepared no later than the afternoon before the inventory. No on-hand quantities are to be shown on the printouts.
3.
All work in process must have the costs of the parts listed on the repair orders and counter tickets.
4.
All packing slips, invoices, credit memos, and any other documents affecting the inventory that have not been processed by the accounting office should be costed and totaled.
5.
A "Before Inventory" stamp should be used on all purchases, credits, and other documents starting two weeks before the store’s inventory. After the inventory is taken, an "After Inventory" stamp should be used for 2 weeks to identify reconciling items.
6.
Determine how to inventory special order parts. Does the parts department require customers to make prepayments on non-returnable special-order parts? Have all customer prepaid parts physically held in the parts department been identified for reconciliation purposes? These can be handled by doing one of the following:
- a. Segregate or otherwise exclude these parts from the physical inventory so that these parts will not be counted.
- b. Include these parts in the count, and then subtract the value of these parts as a separate line item on the parts inventory reconciliation.
7.
If the parts manager intends to exclude certain parts from the count (particularly, stock orders received after count sheets were printed, as to avoid unnecessary write-ins), verify that these parts will not be counted and that the packing slip will not be included as a reconciling item. Make note of these shipments for purchase cut-off information.
8.
If the dealership has any of its parts out on consignment, ensure that these parts will be recorded as a reconciling item adding to the parts physically counted. Please ensure that there are accurate records to back up the value of the consignments.
Proper preparation prior to your inventory session sets you up for a more successful and accurate inventory. It is
the key to an accurate inventory. Once the physical inventory is complete, ongoing
daily maintenance must be performed. If this is completed in full daily, the need for an annual inventory declines dramatically.
Now is the time to get started! If we can assist you with preparing for your annual inventory, please give Kent Ely a shout at 785-760-2943
kent@keaadvisors.com
.
