When it comes to that time of the year for a business to start filing their taxes, many small business owners find it time consuming and start panicking. Documenting lost inventory, income and expenses can prove difficult even for those that use automatic accounting software. With automated inventory management, business owners can track products as they enter into and leave their inventory making this process a whole lot easier.
By streamlining the accountancy process with the inventory control process using sales and inventory management software, all this information can be readily available when tax time arrives. Some other ways inventory management software can make filing taxes easier are as follows:
Multi-Location Business — It becomes very difficult for businesses to track their inventory across multiple locations. If these different locations are across different states, each business location must file their income tax reports separately due to states having different tax laws. This process is simplified with sales and inventory management software. Reports can be published of sales for each business location with ease in a matter of minutes. This saves a business time and man-hours in compiling this information.
Inventory Tracking — The way that a business values its products in its inventory has a large impact on the amount of tax they pay on inventory. The two most common methods are LIFO and FIFO. They stand for “Last in first out” and “First in first out” respectively. LIFO assumes that the last products brought into the inventory will be the first sold and FIFO assumes the first products brought into the inventory will be the first sold. Often a businesses accountant will want to alter the method of evaluation to suit the business owner. This is a difficult process if you can’t track your inventory effectively. Sales and inventory management software allows businesses to have the flexibility to change the method of evaluation should their accountant recommend it.
There is no doubt that inventory management makes tax-times easier. By being in control of the inventory, businesses can minimize the risk of making errors in their tax filings and can reduce the amount of time it takes to compile the documentation.