Inventory accounting
In my previous life as an auditor, the last weeks of the year were always dangerously unpredictable with multiple bookings for inventory counts. While I am not an auditor anymore, I always find myself in the unconscious process of that personal inventory count. To be honest, this annual performance review becomes an obsession the closer I get to New Year's Eve and I painfully list my achievements, and lessons learned. I confess that I devilishly assign myself a grade for the year (somehow, I never got more than a B. One of my 2023 resolutions is to treat myself more favorably). Since December is the unofficial month of inventory counts for auditors and accountants, I will have a post about inventory... and will keep it as down-to-earth as possible.
A decade ago, on a chilly December morning, in Ottawa, I woke up at 4 am, dressed up formally, took my laptop and notebook and my printed lists, defrosted my car, and drove 30 minutes to a national grocery chain. I arrived exactly at 4:55 am and had 3 hours to do an inventory count.
I was familiar with the different methods to perform the best inventory count. However, the manager made me repeat the instructions to him twice.
Floor to sheet: Finding the items on the floor in the printed inventory sheets
Sheet to floor: Finding the items on the inventory sheets on the floor
Random: Finding a random item on the floor and agreeing to them to the sheet or vice versa.
I counted every ice cream pint in the freezer aisle. I counted popsicles, I counted concentrated frozen juice cans and I counted frozen waffles and French toast. I also counted toilet paper, paper rolls bags, and different types of napkins. I counted topical creams, lotions, deodorants, soap bars, shampoos, and moisturizers. I counted spaghetti boxes, linguinis, bow pasta in blue bags, and macaroni. I wondered if the samples selected were indeed random. And I also counted frozen dinners, water bottles, different types of cookies, and crackers for good measure. At 8 am the store opened and I gave up on counting. I signed off the counting sheets, asked the manager to initial them, and left. I went home and after scanning my test results I went to bed and woke up for dinner. To this very day, the frozen isles always remind me of that crazy inventory day, but that wasn't the only one.
A year later, I did another remarkable inventory count. It was a last-minute request for a confidential inventory count. We walked to the basement of a bank, 2 levels down, passed 3 vaults and 2 security checkpoints, and entered a precious metal vault. My 3 colleagues and I were assigned the gold, platinum, and silver bullion count. I counted the platinum bars. They were heavy rectangles, and the count was about counting each bar, weighing them, and comparing them with the list provided. I counted million world platinum bars for 5 hours. Time went fast, it was exhilarating and one of my fondest memories of audit life. After the count, I treated myself to a scrumptious dinner and went home to binge on Nip Tuck.
Needless to say, counting (weighing) precious metals made me feel precious while that inventory count at the grocery store was a total downer. I am proud of my gold age and less proud of the grocery chain episode. However, while it is an expensive dream to own a gold vault, I would choose to be locked in for a week in a grocery store than in a bank vault. Life is full of paradoxes and value is suggestive and circumstantial.
I have done more than a dozen of inventory counts in my audit life. Some, I have enjoyed, some I did not enjoy and some made me miserable. I do not consider myself an expert in inventory. In fact, inventory accounting (or cost accounting) is one of my weak technical areas. The lessons learned from my inventory counts have accompanied me and given me an appreciation for inventory as an asset that I want to share with you.
As we carry many businesses or personalities at once, such as artists, professionals, parents, friends, and partners, we have in our arsenal different types of inventory. When I list my experience on my resume, such as experience in auditing, technical accounting knowledge, experience working at many startups, team building and etc, I explicitly list my most valuable inventory. Your resume or your LinkedIn profile are inventories of you as a business.
If you are in the market for a partner, your dating profile is a list of your inventory, you are actively advertising what you have to offer or not to offend anyone, and you show off your best assets: your height, your age, your beautiful brown eyes, these voluptuous curves, your humor (your welcome message), your idea of the perfect date (showing how romantic or cheap you are) and etc... whether or not you are able to deliver as advertised is a different story. Once you find that partner, you move to the next phase of product development and start showing your housewife/superwoman/mother skills. You bake, cook, clean, smile, laugh, pay for dinner, show off your amazing lineage, show off your adventurous side by canoeing, and your responsibility skills by volunteering to dog sit.
I do remember most of the inventory counts methodologies and can discuss LIFO, FIFO, and average cost. Inventory as an accounting concept is inevitably linked to the end of a period, as a measure of good hygiene or good business sense. An inventory count is a review of what is left, what exists, and of what is possible. How are you preparing for your own inventory count at the end of 2022? Do you have a list that you can compare to? Sheet to floor? Or floor to sheet? Or do you just go random, assuming something exists when actually it doesn't?
hashtag#accounting hashtag#cpa hashtag#thebalancedsheets hashtag#inventory
