As a multi-sales channel business, you know all about seasonality. There’s the holiday season, wedding season, and back-to-school season.
There’s also the special-day season (e.g., Mother’s Day, Father’s Day, Valentine’s Day), and they all, generally speaking, provide you with opportunities to grow your business and your profit.
And then . . . there's the tax season.
Tax season is not a profit-and-growth-making timeframe, but like all other shopping seasons, it’s inevitable. And even though you know it’s coming, you may feel like you’re always racing to reconcile your inventory before that tax deadline arrives.
Fortunately, Cin7 is here to help you take a breath and get prepared. Cin7 automates the inventory reconciliation process for you, ensuring that your organizational data is synchronized, accurate, and ready to go when you need it.
Today, we’ll be digging into how Cin7 can ease your inventory reconciliation woes, starting with how these woes happen in the first place.
Inventory Reconciliation: Common Gaps
Reconciling inventory is like doing laundry: a necessary but sometimes dreaded task to make sure you have what you need.
For product businesses like yours, inventory reconciliation isn’t just about making sure you have enough products to meet customer demand. Matching your physical inventory with your digital records also helps you find potential errors, identify (and fix) process issues, and provide accurate financial records.
Unfortunately, if the reconciliation isn’t done right, gaps can occur between your physical counts, accounting systems (QuickBooks, Xero), e-commerce platforms (Shopify, WooCommerce, Amazon), EDI connections, and 3PL warehouse systems. Having physical inventory counts that differ from recorded book values is a discrepancy no one wants.
Plus, you may be tracking your B2B and B2C inventory separately. This requires you to consolidate these individual inventories, which can then open the door for additional inventory errors.
Such cross-channel inventory challenges and discrepancies can result in inaccurate financial information, which ultimately creates tax compliance risks. And compliance risks make you dread the tax season even more.
However, there’s a way to turn your tax frown upside down, and that’s with a simple-to-follow inventory reconciliation process along with the right inventory management tool.
Inventory Reconciliation Process: Step-by-Step (With Cin7)
There are steps that make the resolution process a much simpler one and adding Cin7’s inventory software to the process makes it even more simple. Cin7 gives you a unified, real-time view of your inventory functions (e.g., purchasing, warehousing, sales, and fulfillment) and delivers the features you need to be fully prepared for the tax season.
As an integrated inventory management solution, Cin7 stores your inventory data in a centralized repository, enables real-time information synchronization, automates inventory workflows, delivers multi-location inventory management capabilities, and offers a complete transaction history and audit trail. Basically, Cin7 helps you make your inventory mumbo jumbo make sense.
With this in mind, here are the steps you can take with Cin7 to ensure the resolution process is done right.
- Conduct a comprehensive physical count in early February. Why? Because February is the critical window between year-end close and tax filing deadlines, and you’ll need this information before that window slams shut.
- Run Cin7’s inventory variance reports to identify discrepancies across all connected channels. Cin7’s automated cycle counting schedules and variance threshold alerts make discrepancy finding a breeze.
- Use Cin7’s adjustment features to correct inventory values and sync to accounting systems. These features allow you to fix your inventory issues across multiple locations (specifically, Cin7 offers adjustments for quantity, cost/valuation, location-specific, and zero/no-zero stock management, which can be done manually or in bulk), and the adjustments will be synced with your accounting software.
- Implement automated reconciliation workflows within Cin7 to prevent future gaps. By automating inventory tracking and having updates happen across multiple channels, stock discrepancies can be found and fixed for you. Plus, stock adjustment workflows are governed by approval hierarchies and documentation requirements, so nothing is adjusted without the information jumping through the proper hoops.
- Take a deep breath and relax. With Cin7 helping you manage the inventory reconciliation process, you can stop worrying about not having the information you need for those pesky tax returns.
Getting Ahead of Those Pesky Tax Returns
The tax implications of using Cin7 to manage your inventory reconciliation needs are huge. For example, Cin7 can help you understand how using different inventory accounting methods, such as FIFO (first-in-first-out), LIFO (last-in-first-out), and weighted averages, will impact your tax liability.
Simply put, the valuation method you use determines your Cost of Goods Sold (COGS) and your taxable income. In FIFO vs. LIFO: Understanding Inventory Valuation Methods, we break down each method, to help you decide when one is best for you.
Being an inventory management solution that serves modern businesses operating in the US and internationally, Cin7 supports the several inventory valuation methods as well as offers weighted average for informational and estimating purposes, such as estimating margin.
Cin7 also:
- Ensures your inventory adjustments properly flow through to QuickBooks/Xero for tax reporting
- Maintains proper documentation and audit trails for IRS purposes
- Manages the timing of adjustments and their impact on prior year vs. current year reporting
Don’t Dread Inventory Reconciliation and Tax Season Ever Again
Reconciling your inventory and doing your taxes are not joy-filled experiences, but using Cin7 goes a long way towards making them bearable. Let’s review how Cin7 does this.
Cin7 is an inventory management solution that gives you real-time visibility and assists with your production management, forecasting, and warehousing needs. This includes your need to reconcile your inventory accurately so that you don’t get in trouble with the IRS.
With Cin7, you have up-to-the-minute inventory synchronization across all sales channels and warehouses. Cin7 delivers seamless integration capabilities with your accounting platforms, ensuring you have accurate financial data at all times. And Cin7’s comprehensive reporting dashboards lets you dive deep into your inventory status across your entire operation.
What more could you ask for from your inventory management software? According to Cin7 customer Shay Lawrence, founder and owner of CaliWoods, not much.
“Having everything in one place [with Cin7] smooths out your inventory management needs and offers the best insights into the health of your business,” she says. “Cin7 has the scope to support whatever inventory growth plans we have!”
Cin7’s connected inventory solution eliminates your inventory reconciliation gaps and helps you not dread the tax season. If that sounds good to you, request a free demo today!
