When it comes to manufacturing, understanding and classifying your inventory can help you plan and budget to achieve your business goals.
According to the Federal Government's own business portal, there are three main types of inventory:
Raw materials inventory – Raw materials inventory are raw materials that your business changes to produce its goods and/or services. For example, if you manage an ice cream business, raw materials inventory could include milk you use to make ice cream.
Work-in-process inventory – Work-in-process inventory is any unfinished goods that your business has made. If your business makes and sells chairs, work-in-process inventory would include any unfinished chairs on hand that your business has made.
Finished goods inventory – Finished goods inventory includes any finished goods that are ready to sell. If you have a retail business that buys and sells toys, the toys you buy would be finished goods inventory.
I've lost track of the number of my manufacturing based clients who struggled for years when it came to not only trying to deal with the rigours of business but also take care of their bookkeeping in an effort maximise their business income.
Their argument was usually around time rather than cost, and the perceived difficulties they would encounter when employing the services of either an external accountant, bookkeeper, CPA or accounting firm.
Without exception, the range of professional services that can help with your books and the overall financial health of your business far outweigh the stress, time and wasted opportunities you potentially suffer by trying to be a jack of all trades as far as your own interests are concerned.
If you're in the manufacturing business and in need of assistance, some of the financial professionals you might consider using include:
Accountant - can help with your business’ financial needs including preparing financial statements, managing your tax and providing you with financial and business advice.
Bookkeeper - can keep track of your day-to-day financial transactions, look after your banking, chase overdue payments, pay wages and prepare some financial statements.
Business Activity Statement (BAS) agent - can help you prepare and lodge your BAS to ensure you get it right the first time. They're registered professionals who are specialists in their field.
CPA or Chartered Accountant - can help you with business planning, tax and BAS advice, effective tax structuring and financial reporting.
It’s important to know that although you have a professional to look after your books or accounts, you’re ultimately responsible for any financial decisions.