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Auto Parts Inventory

Getting Ready for Your Year-End Inventory Count

The front of a vehicle

It’s that time of year again – time to prepare for your annual physical inventory.

As the second largest investment in most automotive dealerships, it is imperative that your parts inventory dollars are accounted for. If you do not take this critical step in your inventory management, there is a risk that your ending inventory will be inaccurately stated. 

If overstated, your ending inventory will have a negative effect on your taxable, resulting in a higher tax payable. While an understated ending inventory will have the reverse effect (a decreased tax payable), you will not be in compliance with the IRS, risking penalties and additional tax owing, if audited.

Before you start your physical inventory count, you want to ensure you have properly planned for it. This will help ensure the count goes as smoothly as possible.

Ensuring your employees are properly trained is the first step to an effective year end inventory count. While the process can seem straightforward, there are many mistakes that can be made, which could negatively affect your inventory counting accuracy.

Some of these mistakes include;

  • counting parts without verifying the number;
  • counting packages with multiple units only once;
  • missing parts that are not clearly visible or improperly labelled;
  • and more.

Once you have ensured your employees have the necessary skills and understanding to conduct inventory, you want to be sure your inventory is organized and ready to be counted.

While we do our best to maintain an organized inventory, often, parts are misplaced or out of order. If you are one of the many who need to organize their inventory, start by ensuring bins, shelves and packaging are properly labelled, organize the same parts in one place whenever possible and avoid mixing parts that look too similar.

Now that your inventory is sorted, it is time to start the physical count

While it may be best to perform your count after hours, it isn’t always possible. If you must count during work hours, be sure to communicate with other departments, such as service and body, and ensure that they know their roles and the proper procedures, and make sure all employees know not to move parts and to properly record parts sold after counted.

If this is not a feasible option, consider hiring a third party inventory management company.

At Pro Count West, we have the skills and expertise needed to conduct your inventory count accurately and with minimal disruption.

We will collect and provide inventory data and report on the overall physical and financial health of your automotive parts department.

Your staff will benefit from the resulting inventory reporting as it will help them sharpen their oversight of aged parts and help to expedite the disposal of obsolete inventory, resulting in a gain for your overall cash position. Most importantly, it will ensure your inventory has been properly counted for record keeping and tax purposes.

For more information on our services, contact us today.

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