How to Make Taxes Easier Next Year

Use these practical steps to smooth your road to next year’s taxes. Pay attention to the calculations that gave you the greatest headache this year and break down the numbers that went into them. From there, look for ways to regularly track these numbers and applications that will automate the process.

Photo Credit: www.guardianremovals.co.ukwww.guardianremovals.co.uk

This post is brought to you by Stitch Labs, providers of the must-have app for small businesses to manage inventory, orders, customers and more.

If you’re using Shoeboxed, you’ve already discovered how automating your receipt records can save you a lot of work at tax time. With that in mind, let’s look at another way to save you from extra stress and make taxes easier next year: good inventory management habits.

Step #1: Know what to track

Hindsight is 20/20 at tax time. It’s not uncommon to think, “If only I had kept track this one thing, I would not be up all night with my calculator.”

Avoid this sentiment and make sure to track these metrics:

  • Inventory levels – You need an accurate count of products on hand at all times, but this can get tricky if you sell across multiple sales channels. Consistency here tells you when to reorder and prevents lost cash flow due to overstocking or lost sales due to selling out.
  • Cost of goods sold (COGS)COGS is a necessary metric for completing taxes, but you should track the numbers that comprise it throughout the year. These include the costs of raw materials, along with direct labor costs used to produce the goods. It excludes indirect expenses (e.g. distribution and sales force costs). Tracking and organizing these costs year round will save you the headache of pulling them all together at year-end.
  • Works in progress – Counted separately from finished goods, works in progress include unfinished units that haven’t been sold yet or haven’t been promised to a customer.

Step #2: Automate your tracking

Embrace current technology that automates the process, to make it easier to keep track of the metrics you need to.

  • Commit to a system – While more than one inventory tracking system will work, you need to commit to one and make regular updates. Set a time at the start or end of your day to enter inventory data and do a quick check for accuracy.Early on, an Excel or Google spreadsheet can work well for tracking your data. Rows and columns are easy to add as you include new products or new inventory data. As you grow, transcribing data and product updates to a spreadsheet becomes time consuming. Here, an inventory management system like Stitch Labs can serve as a robust repository for your data and serve as a daily dashboard.
  • Integrate your data – Look for systems that allow you to integrate your sales channels as this will bring all your data into one place. Many people let sales numbers sit within each channel until they need to add them up. Don’t lose day-to-day visibility of your inventory and sales because your data is in disparate locations. Plus, it slows you down when you need to bring all your totals together, like when you do your taxes.This is another place where an inventory management system can make taxes easier next year. A system that integrates with multiple sales channels draws your sales numbers into one place and update your inventory automatically.This saves a lot of time in transcribing inventory and sales data into your own spreadsheet, plus it puts it in a format that’s easy to pass on to your accountant at tax time.
  • Go paperless – Collecting and tracking your data digitally makes it easy to find the exact record you need when you need it. As you automate, look for systems that allow you to make your data digital. Not only do paper documents consume space and take more time to organize, they aren’t searchable.Additionally, digital documents can be backed up online. This lessens the risk of losing important data, but also makes it easier to access and share with others you work with. For example, inventory tracking software will let you export your data to CSV format  so your accountant can use immediately.

Use these practical steps to make taxes easier next year. Pay attention to the calculations that gave you the greatest headache this year and break down the numbers that went into them. From there, look for ways to regularly track these numbers and applications that will automate the process.

3 Things Every Small Business Owner Should Know About Inventory Management

This post was contributed by Stitch Labs, providers of the must-have app for small businesses to manage inventory, orders, customers and more.

Inventory management is the process of tracking the size and scope of your product. In everyday terms, it’s the thinking and organization surrounding your how much inventory and where it is.

Entire college courses are devoted to inventory management, but there are three things every small business person must know about inventory management:

#1 Why Inventory Management is Important

Good inventory management helps you answer important questions about your inventory that need to be answered so you can make informed business decisions. Examples of these questions include:

  • Am I keeping enough inventory on hand?
  • Are any of my products overpriced?
  • Are any expensive items tying up my cash flow?
  • Is now the right time to order another run of a popular item?
  • Am I losing units from theft or damage?

As you practice good inventory management, you’ll reap important data about your product that will be your best guide to answering questions like these.

Without tracking and organization, you’re flying blind (something Shoeboxed definitely understands). Making decisions without good inventory tracking results in problems like overstocking, overselling, poor pricing, and tying up cash flow.

# 2 How to Calculate COGS (Cost of Goods Sold)

You are probably aware of COGS from reporting inventory on taxes. This acronym, which stands for cost of goods sold, is the amount you spend to get a product into a sellable state and put it on your shelf.

Knowing your COGS has clear benefits in decision making:

  • You can easily see how your pricing compares to what you’re spending on a unit. COGS encompasses the entire range of dollars you’re spending to create and stock a unit instead of just the per unit price you pay a supplier.
  • COGS can also lessen your tax burden at tax season and help you plan future expenditures with your accountant.

At a minimum, you will need to calculate COGS once per year for taxes. However, the benefits listed above make a case for tracking this metric throughout the year. Calculating COGS manually with a pen and paper is a burdensome process. However, good inventory management software calculates COGS for you and make the information available whenever you need it.

#3 Good Software Makes Inventory Management Way Easier

When your business is small, it can be easy to keep track of several product variants in a notebook or a spreadsheet. However, you’ll quickly outgrow these as you expand your business.

When you sell on more than online channel or also sell products in person at trade shows, tracking and updating unit counts is time consuming. Good inventory management software can automate this process and keep accurate counts for you.

For example, Stitch integrates with both Amazon Marketplace and Shopify. If a product sells on Amazon, Stitch will automatically reduce the quantity available on Shopify. Not only does this save time and ensure accuracy, it also prevents unhappy customers due to overselling.

Inventory management software will also organize your data and provide meaningful reports that make it easier to make decisions based on the big picture. Plus, you can readily export this data for your accountant and save yourself the hassle of pulling together spreadsheets, invoices, and receipts.

Finally, good inventory management software automates invoices and line sheets, producing well-designed documents from your inventory data at the click of the button. Not only does this save you the time of transcribing data into a template, it adds that professional touch of consistent graphic design.

Summary

Inventory management is a daunting topic for many small business owners. However, key concepts, like COGS, provide important inventory information for making good decisions. While it may be easy to track inventory by hand when your stock is small, inventory management software offers many features that grow with your business and afford you time to grow it.

photo credit: flickr.com