Let's Take Inventory

Analyze How You Book What You Own

How did the word "inventory" grow up to become such an ugly concept?  Mention that word to a business owner and watch how unfriendly that word becomes.  Nobody likes to take inventory.  It is tedious work.  It requires a hard dash of boring procedures that can take a very long time to complete properly.  If the inventory is a mess in the business system of tracking, it can become more grueling than tedious to examine.  If the inventory is a mess in the business system, it can reveal unwanted discoveries.  If a business owner has a hole in the business system, taking an inventory will expose it.  Taking inventory has become one of the business responsibilities most owners do not like to perform.  It is too tedious, too difficult to do properly, too revealing and most of the time, it projects a greater loss than once was expected.

The word "inventory" has grown up to become an ugly concept.  Most business owners refer to the procedure of taking inventory as a negative duty.  They usually refer to it in a negative light.  Taking inventory brings on a different set of unwanted business activities.  Taking inventory is one of the required business procedures that is performed in order to find holes, errors and areas needing adjustment.  Taking inventory means we count our stuff to see how well we really are doing.  All of our business numbers are set in place with the final exception of knowing for sure what we own.  Inventory is the final step to determine if what we say we own is really in our possession.  Most business models reflect higher ownership than what the true inventory reveals.  Shrinkage is not a process most business owners enjoy.  The shrinkage we discover comes from the inventory steps we perform.  Most owners do not relish the idea to examine the stuff they own in their house to see if what they say they own is really there.  Most owners hate to discover that they do not own as much as they thought they owned.  Owners hate to lose.  Inventory will reveal what they lost.

Let's take inventory.

We just did.  We examined how we feel about taking inventory.  We do not like it.  We do not like exposing our loses to the bookkeeping system.  We prefer the numbers that reflected more profits.  We do not prefer the numbers that were adjusted down due to the loses we discovered in our inventory.  If our profit numbers were bad going into inventory, they likely will come out worse after it is completed.  We hate that kind of revealing exposure.  It smacks wrongly upon the management process of our business leadership.  When we discover our inventory is out of line between what was booked and what was physically counted, it says a lot about who is in charge.  The persons in charge of that part of the business model have some serious explaining to do.  When ownership changes from having one set of book values turn into a lower set of physical values someone needs to be held accountable for the drop in difference.  Inventory is one of the best methods that reveals holes in the business model.

Let's take inventory.

I need to find my holes as early as I can, before the year comes to a close.  Why, pray tell, would I wait a whole year to find out where my business holes are?  Do I enjoy taking huge loses once per year?  No, of course not.  If that is the case, why do I wait a whole year to perform the 'year-end' inventory procedures?  I do not get it?  Do we only do inventory once per year because it is a routine and customary accounting practice?  What gives here?

Let's take inventory.

I know it is a lot of work.  I know it takes a lot of time.  I know it requires everyone to become more tedious than usual.  I know we need to stop certain business processing during the time we perform an inventory.  I know all of these things are required.  So, let's take inventory anyway.  I want to find out where my holes are developing.  Every business model has holes it develops, every single year.  If those holes produce unwanted loses, let's find them earlier.  If we find them in the fifth month of the year, just think about how much ownership we saved by not waiting until the twelfth month of the year.  Why give seven months of some of our ownership away for free?  Better yet, why lie to ourselves about what we own when the booking system we are using is not working well?

Let's take inventory.  It will reveal where we are doing it incorrectly.  How can we fix what we are unwilling to see?  Let's go see what we do not know.  Let's take inventory.  We might discover some things we do not see.  We cannot fix those things until we discover what they are.  Why wait a whole year to do that step?  Do we not care more about our success than that?  Maybe we care too much about our false sense of success?  Which one is it?

Accept What It Reveals, Then Fix It

Most business owners believe the system they are using to book their ownership values is the right system to be using.  That is why they are using it.  Most business owners also believe that they are booking their values correctly every single day of the year.  Therefore they do not feel they need to review how they are performing the booking process of their inventory ownership values.  They know they are right.  So why check it out?  Once per year is enough.  Some business models do little cycle checks on certain portions of inventory categories, or regions.  I like that step.  At least it will give an indication that something is not working well in the booking system.  Circle or cycle inventory checks are a great way to find something going wrong with the booking of ownership.  I like that kind of review.  It is not as tedious and will likely expose a hole in the business of booking system.  If you do not perform this kind of business review, introduce it.  You need it.  Do not put it off.  Get started on it right away.  Do not wait until the end of the year to discover how much you are losing.  Plug the hole as early as you can.

Business owners have a serious job.  They plug nasty business holes and provide solutions to business problems.  Most business owners hate both of these responsibilities.  As a result, these duties get watered down too much.  An owner needs to make sure each day is filled with the management success of these duties performed very well.  Learn how to plug holes and fix problems.  That is exactly how leadership works.  That is exactly how a business owner becomes more successful.

If inventory traditionally reveals some business holes in ownership booking, get it fixed.  Learn how to take inventory more often and learn how to make it more accurate.  Take your ownership battles more seriously.  Produce a business model that respects how it defines its accuracy in ownership.  If your business model struggles in this category of responsibility, it will not survive well long term.  Take ownership of the ownership process.  Do not find ways to put off the accuracy of the ownership process.  What you buy is what you own.  What you sell is how you grow.  How the two relate determines what level you profit.  Make sure you record accurately how this process is being done.  Your future will not actually feel any better if you lie about how much you own.  If you avoid fixing the ownership holes, you are lying about how much you own.  You will not feel better for it.  Your numbers will not help you if you do not help them.  In fact, they will destroy your business efforts if you do not fix them when they need fixing.  You will soon discover that your ownership will shrink beyond what you can afford if you do not stop the shrinkage before it is too late.  Find the holes, take inventory.  Then fix the holes you find.  That is your job, do it well.

Let's start off next week and develop a good plan to do inventory.  Design the method that you will use and prepare your staff for the work that will be done.  If you have some pre-inventory methods you customarily perform, get them started.  Let's take inventory and go find where we have some holes to fill.  Help the staff understand why the holes need to be discovered.  Give them incentives to reveal where they exist.  Keep in mind, nobody likes to reveal where they are weak in performing what they are hired to do.  Some will actually work harder on covering up what is being done incorrectly.  Help them overcome this desire.  You want to have an inventory that comes in well but also reveals where it is not performing what it should be doing.  Look more for the holes rather than the production of good numbers.  When the holes are found, make sure you correct them.  Have your staff help you to fix them.  You will need those changes to become part of their new possession of work activities.  Habits will be hard to change.

Let's take inventory.  It will shake up some bad habits and help to clean up what you say you own.

Until next time...