Reporting
a lower inventory to their accountant is something many business owners have
been doing for a long time. And many
accountants just accept the number.
In
addition to the obvious concerns, when it comes to selling the business, big
problems can arise.
Can the
inventory be verified and accurately costed?
Is all the stock of reasonable age?
Is the inventory current and saleable?
There are
many thing business owners can do to make their businesses more
marketable. Up-to-date and accurate
financials, diverse customer base and vendor list, and key personal in place
are all great ways to maximize value at point of sale.
A lesser
known yet impactful characteristic of a business for sale is its inventory.
Consider
the scenario of a business with aged, damaged or redundant inventory. While those assets can be shown on the books,
and in many cases to banks for financing, they will be viewed negatively at
point of sale. Buyers may trust but will
verify and eventually discover inventory misgivings as deep into the process as
at the closing table.
The best
way to overcome this pothole is to give their accountant an accurate inventory
value each year, to regularly clean-out and clear-out non-saleable goods and
damaged items and to have a systems to monitor and control levels for busy and
slow seasons.
Do you have small
business questions you would like answered about this article or others? Please visit www.VRWindsor.com
or call 519-903-7807.
William Sivell is a
sales representative of VR Windsor Inc., Business Brokerage; his blog appears
every Tuesday.
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