Mike's Inventory Management Blog

Inventory is a line item on your balance sheet and cost of goods sold (COGS) to calculate net income on your income statement. If your inventory records have any errors, they can affect your financial statements and create an inaccurate financial picture. 

As the year comes to a close, many companies are planning for their year end. To help you on your way, here are three steps to conducting an effective year-end physical inventory count in your parts department and some common errors to avoid.

Receiving automotive part inventory seems like a straightforward task, and can be when done properly. 

But it is also a common time for inventory errors to occur due to miscounts, inputting mistakes or having untrained staff receive shipments. That’s why, like anything you do in your business, having proper inventory processes and training are paramount.

Surplus inventory in your automotive dealership often leads to waste and losses. Sure, sometimes a well-planned marketing campaign or a sudden unexpected spike in service needs can help reduce the stock. But the reality is that once inventory becomes obsolete it usually doesn’t do much more than take up space and capital. 

Beginning inventory is a current asset and is the value of your automotive parts inventory at the start of an accounting period. 

Beginning inventory is an important metric – it’s needed to determine the cost of goods sold (COGS) for your company’s income statement. It’s also used to calculate key performance indicators (KPIs), including average inventory and inventory turnover, that give you important insights into how your business is performing.

Annual inventory counts are an important part of managing any automotive parts department. They confirm your inventory is accurately recorded come year-end and tax-filing season. 

Automotive parts inventory control may sound like a straightforward responsibility. But if you have had any experience behind a parts desk, you know this is one of those things that’s easier said than done. Specific skills and strategies are needed to properly control inventory, without it things can quickly get out of hand. 

Managing your automotive parts inventory is time consuming and costly, but it is also a necessary investment to ensure you can provide your customers with the service they expect. It’s simply a critical process to many areas of your business. 

To ensure you are managing your inventory as effectively as possible, it is important to consider the software you are using and the data it produces.   

What is the importance of automotive parts inventory software?

Inventory management software is the foundation of any automotive parts department – it helps you maintain an accurate inventory, get a picture of your overall position and manage your purchasing processes. But finding the right software can be a difficult task. 

While there are a number of options in the automotive industry, an assessment of your needs can help narrow down your choices. 

Some of the main benefits of an effective auto parts inventory software include:

Inventory errors can majorly affect with your dealership’s bottom line. And a lot of the time that has to do with errors in counting. That not only affects your cost of goods sold, but also your balance sheet, and that means the overall picture of your company’s financial position can be skewed. 

Let’s look at what we mean in more detail …

Sometimes we fall victim to settling with what’s to be expected. Take for example the automotive industry … Often those who work in it have come to expect things like the frustration of warranty reimbursement or the fact that inventory has a habit of misplacing itself. 

But you don’t have to simply deal with these problems because they are the norm at many dealerships and service shops.