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What Accounting Needs to Know About the Physical Parts Inventory Process

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Checklists for Controllers and Accounting Managers


There can’t be too many people that actually enjoy taking a physical inventory of the Parts Department. It is a tedious task made even more difficult as it has the potential of discovering large discrepancies between what the balance sheet says you have and what actually is on the shelf.


But does it have to be that way? Experts say that by employing process driven prep and checklist systems, much of the pain and uncertainty can be mitigated.


Controllers have a “need to know” about this auditing process and, in fact, should take an active role to make sure you receive an accurate physical count and reporting.


So, what’s the secret for a smooth and accurate physical inventory?


DealersEdge Subject Matter Expert - Mark Payne, of Total Dealership Services, shows us how to take the pain and worries out of your parts physical inventory by using checklists to stay ahead of the process.


The key for a successful physical inventory is to get a head start well before the scheduled date.


ACCOUNTING DEPARTMENT ROLE


Checklist-Ten Days Prior to the Actual Count


  • The Controller should meet with all the individuals involved with the inventory.


  • Responsibilities and schedules should be clearly understood, and any questions should be directed to the Controller.


  • The Controller should verify that the Work In Process is being cleaned on a daily basis.


  • The Controller should verify that the factory statement is reconciled correctly.



Checklist-Two Days Prior


  • The Controller should verify that the posting of the outside purchase invoices, parts invoices, repair orders, and factory invoices is current.


  • Review Pending Purchase Orders and validate.



Checklist-One Day Prior


  • The Controller should verify that the outside purchase invoices are being brought over from the Parts Manager several times during the day.


  • This will allow these invoices to be posted throughout the day rather than all of them at 4:30 PM.


  • The Controller should have available the final Work In Process listing that will be used on inventory day.


  • If you have automatic invoicing, run your daily Job-Stack.


  • This will post and report all closed invoices.


  • If you have any open invoices, you will require a total value of the parts on these invoices for the accounting department.


  • Run a listing of your parts inventory.



Checklist-Day Of Inventory


  • The Controller should verify that the parts invoices and repair orders from the previous day have been posted.


  • The Controller should check the Work In Process with the Service Manager and the auditors.


  • After the Work In Process is checked, the Controller should give the auditors and the Inventory Supervisor the general ledger balance.


These are just the steps or checklists for the Accounting Department. Mark Payne, our subject matter expert, also offered Checklists for both the Parts and Service Departments related to the Physical Inventory Process.


Our thanks to Mark Payne of Total Dealership Services!

A complete Chapter of the DealersEdge Guide - Parts Inventory Management By the Numbers. This Guide explores the magic of managing an inventory of many, many items successfully. Handling the Physical Count is just a small part of successful management of a dealership Parts Department.

See Below for More Details…

 

This Parts Operations Guide Provides You With a Deep Dive Into the Workings of Today’s Dealership Parts Department


This DealersEdge Guide provides details centered on the numbers, reports and processes of a well-run parts department focused on providing the parts needed by your Service Department on a timely basis.





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