Written by Scott FairThursday, 27 June 2013 12:25
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“ A POS system gives huge gains in inventory control”
So, let’s look at the facts.
A POS system that is properly implemented and kept up to date, that is used as designed following the designed workflow, can greatly increase you capabilities to track and control your inventory. You can spot waste, eliminate or reduce internal theft, and have a significant grasp on cash flow.
A poorly implemented system that is not maintained or used as designed can create a bigger mess than you ever dreamed possible. You can have orders placed for items that are already over-stocked, or are not selling, increased theft, and huge amounts of time and money spent trying to correct the mistakes.
One of the largest issues we see on a day to day basis is quantity control on inventory. If you do not have accurate inventory counts, with the correct cost and price on the items, the fact is you have no idea where you really stand.
Most people assume that a POS system is there to sell the items, and to increase the speed of the sales and add accuracy to the transaction.
That is only part of the picture.
Accuracy in the day to day activities can be far reaching. An inaccurate count can result in items being sold into a negative quantity.
Let’s take an example.
We sell a blue ink pen. Our POS system, because the quantity is not correct, assumes that we do not have any. As the data transfers to the QuickBooks accounting software, it enters a negative Cost of Goods sold entry into the accounting. So, instead of increasing the amount in Cost of Goods sold, it has just reduced it. Now, an ink pen is typically not a high dollar item. Let’s say they cost us 50 cents. Now, let’s multiply that by 1000, (We have just reduced the COGS by $ 500.00) and let’s say the same thing happens every month for a year. That’s $ 6000.00 we are off on our accounting in just 12 months.
As we prepare for taxes, the accountant now has to make adjusting entries to correct the issue. That means we have to research where the error came from, (let’s say we had an employee doing the research at $9/hr, and it takes them 7 hours to find it and accumulate the data, that is another $ 63 dollars) and then comes the accountants fees ( I won’t even ask), the additional time it takes to get things corrected, rerunning reports, etc, etc… The amount of time and money spent taking care of this can get staggering.
All because the inventory counts were not kept accurate.
Here is another quick example:
We receive a shipment of 10,000 of the same blue ink pens. But in this case, we do use the Receiving Voucher to bring them in. We just edit the quantity in the items list, and we have the item with a 0.00 cost.
So we have brought in $ 5000.00 dollars in inventory with no offsetting cost, and when the item is sold, the software is going to assume we have a 100% profit margin.
If we sell the pens at $ 1.00 each, we will show $ 10,000.00 dollars profit and no expense, meaning we now owe tax on the income, and have no way to show that we paid anything.
These are just a couple of quick examples to show why it is important that we use the software as it is designed, and why we need to stay on top of the inventory counts and processes. Having the people properly trained, following the procedures and accurately counting and receiving the merchandise, can make your end of year reporting a dream.
Failing to keep counts and cost up to date and accurate, can eat away a significant chunk of the profits, cause you to pay far more than you need to, saddle you with inventory that does not sell ( or in some cases expires before it can be sold) and result in a bill from the accountant that looks like the national debt, minus 4 cents.
Just something to ponder…
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