Mike's Inventory Management Blog

There’s an automotive tool that you’ve possibly heard a lot about in recent months. You may already have it installed at your dealership. That tool is a dealership management system (DMS).

For many parts departments inventory is a one and done task every year. They do their annual physical inventory count near year end to update the records and then call it quits until the next year end rolls around.

Are you looking to enhance your annual parts inventory and improve the financial health of your automotive parts department? Then understanding ending inventory is key!

Ending inventory is the value of the automotive parts you have available for sale at the end of a given accounting period. It is calculated by adding beginning inventory and purchases, then subtracting cost of goods sold (COGS).

Carrying costs are the cost of holding inventory in stock. They’re also referred to as holding costs and inventory carrying costs, and they can have a significant impact on your dealership’s bottom line.

Obsolete inventory, also called dead inventory, is automotive parts that are at the end of their life cycle. They have not been sold and they are not expected to sell for any substantial value, if anything at all, nor will they be installed in a car. 

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. 

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.