How can I choose the best system of small businesses?

Inventory system is an internal method that the company uses to order, check and billing products it sells to consumers. The SMEs inventory system reflects the process of larger society, albeit in a less intense environment, due to the difference between companies. In the business environment, two types of inventory systems are common: periodic and permanent. These are accounting systems, although the company will often build its inventory procedures around these systems. For example, small businesses that sell similar goods or large groups of objects can benefit more from the periodic inventory system, which is updated only once a month or quarterly. This is advantageous because a small company will start every month with the initial inventory value and update it at the end of the accounting period. This eliminates thesese need time spent counting items that are not easy to separate or include a time -consuming process that makes money generating activities.

The permanent inventory system is much more involved; Within this system, the company updates its accounting book after each purchase, sale or editing of the inventory account. This small -scale inventory system works well for companies with unique items or inventory products that are extremely valuable. Although it is more time consuming, it provides greater accuracy for small businesses and the ability to order stocks without having too many products at hand.

Inventory valuation is also an important feature of a small enterprise system. The valuation determines the cost of the company's account and the costs of the goods sold for each accounting period. The most common three methods are in business: IRST in, First Out (FIFO); Last, first out (lifo); and weighted average cost calculation. FIFO requires the company to sell the oldest goods that are first stated in your accounting book account. This will lead to the highest cost remaining in the accountB and the lowest costs of the goods sold, resulting in a higher net income reported in the profit and loss statement. LIFO is the opposite of FIFO; The costs of the goods sold are therefore higher and the hand supplies are lower than FIFO. The weighted average method calculates new costs for each stock item after purchasing and editing on your account.

Choosing a valuation method for a small enterprise system will depend on how the company wants to report a net income. The general theory is that FIFO reports a higher net income, resulting in a higher tax liability for small enterprises. This can create a difficult situation in cash streams if the company has to pay national taxes or local administration.