Manufacturing inventory management is a common challenge for manufacturers. The production process involves numerous materials, labor, and overhead. The following tips will help you manage your physical inventory and the accounting processes in your business, which will aid in profitability.
Manufacturing Inventory Management: How To
Separate materials by product. Separating items by-product will ensure that each production line has adequate materials to produce goods.
Institute internal controls for managing the physical items. Basic internal controls will limit the number of individuals who can order inventory, where your company stores inventory, how often your company counts inventory, and various other controls for the entire inventory process.
Select a cost accounting method. Job costing tracks inventory materials for each item produced, which can work well for custom items built to detailed specifications. Process costing tracks inventory by the production steps needed to produce goods.
Implement a perpetual inventory method. Though more timely to set up and control, perpetual inventory updates your accounting books every time someone orders materials, allocates inventory to the production process, or sells finished goods.
Create an inventory reconciliation process. Counting and matching all physical inventory goods to the accounting books ensures accurate numbers are always available.
Looking for a Manufacturing Accountant?
For more information about manufacturing inventory management and how a qualified manufacturing accountant can help your company, please call LSL CPAs at (714) 569-1000.
By Rene Carlos
