It's that time of the year again. The year is ending and shortly the taxman will want his money. This is the part of owning an herbal business that all owners dread ... taking a physical count of inventory calculating the value of that inventory, accounting for expired product and calculating your income. It is just gross.
Thankfully there are some things that you can do to make this whole inventory taking process a little bit easier.
Tip #1 - Don't take inventory alone
If you are a solo entrepreneur, this is the time to call in favors. Ideally you want to have one person check the physical inventory and call out amounts to another person who is checking the inventory record and updating it. If there a lot of people owning you favors, assign a different team of two to count up each type of item (one for tinctures, one for caps, etc.).
Tip #2 - Guesstimate the less expensive items and count those of high value
The purpose of taking inventory is to know what you currently have in stock so you can, plan for the year ahead, determine asset value and ensure you have what you need to make your herbal products. If an item is expensive it will have a bigger impact on your business and needs to be accurately accounted for. Less pricey items have less of an affect and require less accuracy.
For inexpensive liquid and dry ingredients, know how much the storage container they are in holds. Then just guesstimate how much you have left. If the amount matches what you have on record then mark it as checked and move on. If you are not sure, you can weigh your dry ingredients in the packaging and make a guesstimate that way. However, don't pour out liquid ingredients into a measuring beaker to get an exact amount unless the ingredient is pricey. This process takes time and is only worth it for your high cost items.
For the smaller inexpensive items like caps and droppers, weigh one item and then weigh everything you have. Divide the total weight from the weight of one item and you will have a good estimate of how many are in stock.
Tip #3 - As you are taking a physical count of inventory, note what has expired or gone off
Taking inventory gives you a unique opportunity to lay your eyes on everything sitting on your shelves. As you check ingredient and finished product amounts, also check the product itself. Look for the expiry dates, give liquids a little shake, check the color of dry goods and give all your ingredients a quick sniff.
Just because the expiry date hasn't yet arrived doesn't mean a product or ingredient is still good. Heat, poor storage containers or light can make the best ingredients go off way before their time. It is best to find out now, when you have time to reorder and remake than when you get that rush order from a customer and have to disappoint them.
Once you have found all the expired items, including those on the back of the shelf you forgot you had, list them separately. Determine the value of each expired item and add that to your expired list. Give this list to your accountant. They will record this amount as a business loss.
Tip #4 - Make note of what is expiring in the next month
There is nothing worse than discovering a pound of dry herb just expired. If only you had known, you could have tinctured it and extended it's life by years. Now is the time to identify those that are about to reach their best before date and put a plan into place. If it makes sense to tincture it, then you have time. If it doesn't, then maybe there is a fellow herbalist who would like to purchase it? The solutions for recouping your costs are endless and you have the time to implement them. Wait and you will have to take a loss.
Tip #5 - Year end is the easiest time to start using software to track inventory
Few people will argue that using inventory tracking software makes year end processes much easier. One click and you have your inventory amount, two clicks and you have your expired product list, three clicks and you have an income report. So why don't all herbal business owners use it? One word ... time. It takes time to set up a new system.
Right now, that magical time between Christmas and the New Year is a great time to get started. You have taken inventory, things have slowed down after the Christmas rush and you haven't yet begun the next fiscal year. Not only do you have more time, but you have a fresh slate which makes the whole process faster and easier.
Whether you use Kerrii with it's game changing pricing tools or some other inventory tracking software, now is the time to get started. The little extra time you put in now will save you hours this time next year as well as for years to come. Do yourself a favor, start using inventory tracking software.