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In both merchandising and manufacturing, a company's annual inventory count is crucial for accurate financial reporting. As such, small-business owners can hire an outside firm to perform the count or keep counting duties in-house. There are pros and cons to both approaches, and understanding the options can help you determine the best approach for your company.
Cost
For many small-business owners, hiring an outside company to perform the inventory count is cost-prohibitive. Outside-count companies can be expensive, and less-expensive companies are often less expensive for a reason. However, if you determine that an outside team is right for your company, then you can reduce costs by scheduling your inventory count at an off-peak time. The busiest time for inventory counts is the end of the calendar year, and the closer you get to December 31, the higher demand will be. If your company can perform an annual count at an earlier date with an outside vendor and then complete a smaller count of more-expensive items at the year-end date in-house, you could save some money.
Control and Dependability
One of the benefits of keeping your inventory count in-house is the control that you have over the employees doing the count. When your employees are on the floor counting, you can provide coaching and feedback as the count is ongoing. If you use an outside vendor, you might not feel comfortable going directly to the vendor's employees with any concerns. In addition, you won't have control over the dependability of the workers scheduled to count your inventory, their background or ability or their attention to detail. While it is in the outside company's best interest to deliver a trustworthy team, you might feel more comfortable knowing that the employees you screened and hired are the employees counting inventory.
Scope of Count
Some small-business owners don't have a choice but to hire an outside inventory count team due to the scope of the inventory count. Resellers, merchandisers and companies with in-house distribution centers often have so much inventory on-hand that they simply don't have enough employees to count the inventory in a reasonable amount of time. In this case, business owners can blend their employees with the outside vendor's workers. This has several benefits. First, both outside workers and employees are likely to be more accountable when they know that workers from the other party are watching them. Second, the blending of the two groups can be less expensive than hiring enough outside workers to complete the entire count. And current employees can answer any questions from the vendor's workers as they come up, making the count more efficient.
Familiarity
One of the benefits of keeping inventory counts in-house is that your own employees are more familiar with your products than outside counters are. For some companies, this familiarity is key. For example, if you are a reseller of computer parts, your products might look similar to one another to the untrained eye. However, the cost of these products could be substantially different. While ideally your inventory should be organized to avoid such mistakes, in-house counters are likely to be better at identifying hard-to-spot differences between products.
References (1)
- Auditing and Assurance Services: An Integrated Approach: Alvin A. Arens, et al.
About the Author
John Freedman's articles specialize in management and financial responsibility. He is a certified public accountant, graduated summa cum laude with a Bachelor of Arts in business administration and has been writing since 1998. His career includes public company auditing and work with the campus recruiting team for his alma mater.
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- Brand X Pictures/Brand X Pictures/Getty Images
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Freedman, John. 'In House Inventory Vs. Outside Company Doing Inventory.' Small Business - Chron.com, http://smallbusiness.chron.com/house-inventory-vs-outside-company-doing-inventory-72592.html. Accessed 25 June 2019.
Freedman, John. (n.d.). In House Inventory Vs. Outside Company Doing Inventory. Small Business - Chron.com. Retrieved from http://smallbusiness.chron.com/house-inventory-vs-outside-company-doing-inventory-72592.html
Freedman, John. 'In House Inventory Vs. Outside Company Doing Inventory' accessed June 25, 2019. http://smallbusiness.chron.com/house-inventory-vs-outside-company-doing-inventory-72592.html
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