At the end of each year, we ask you to confirm your inventory balance. This helps us (and you) double check the accuracy and make sure we’re all aligned before closing your books.
Ideally, you should align the inventory balance in Finaloop at year-end with your physical inventory count value or best estimation (if physical count and valuation is not practical). You can learn more about estimating your inventory value in the FAQs below.
Aligning your inventory balance with your physical inventory is crucial for the following reasons:
Tax compliance: Your Finaloop inventory balance is the basis for your tax returns. Its precision directly impacts your financial statements and your taxable income.
Detecting discrepancies and ensuring accuracy: This inventory confirmation ensures that your financial records match your actual inventory. This process identifies errors, guaranteeing precise inventory records, and ensuring the inventory-related impact on the P&L (mostly COGS) is accurate.
Maintaining consistent records: Confirming the year-end inventory balance prevents inconsistencies across multiple years, ensuring accuracy year-over-year.
FAQS
Why is this necessary? Isn't Finaloop always supposed to be accurate?
Why is this necessary? Isn't Finaloop always supposed to be accurate?
Finaloop calculates your inventory value based on purchases and COGS (which is based on quantity and your landed cost per unit). In theory, all inputs should result in an accurate balance. However, discrepancies may arise if any of the inputs are inaccurately recorded or calculated. Here are a few examples of when this can happen -
Purchases amounts are inaccurate, which can happen if you miscategorized bank or card transactions as inventory, double counted bank or card transactions and bills, or didn't add all inventory-related bills to Finaloop.
COGS are inaccurate, due to a gap in the landed cost per unit - this can happen if the cost per unit inputs weren't accurate and didn’t fully reflect landed costs. To learn more about landed cost, see this article.
COGS are inaccurate, due to a gap in the number of units sold/fulfilled - this can happen if the recorded number of units for COGS isn't fully accurate.
COGS or inventory are inaccurate, due to missing sales channels, dead inventory, or product giveaway entries.
What do I do if there is a difference between my Finaloop inventory and my physical inventory count?
What do I do if there is a difference between my Finaloop inventory and my physical inventory count?
Here’s how to close the gap between your Finaloop balance and your physical count -
Purchases - Review your bank and card transactions to ensure all inventory-related purchases are categorized correctly and show up in your Purchases screen. Remove or add inventory-related transactions and/or inventory-related bills as necessary.
Cost per unit - Adjust landed costs per unit (in the individual product screen, go to the cost per unit tab, and adjust your cost per unit accordingly). This will change your COGS and inventory value (higher cost per unit -> higher COGS -> lower inventory value).
Missing sales channels - Add COGS for any missing sales channels, dead inventory or product giveaways
To add per-SKU: In the individual product screen, go to the COGS tab, and click "Add to COGS". Based on the quantities you add, we'll calculate the dollar value based on the cost per unit.
To add per-channel: In the COGS screen, click on "+ Report per channel", and add the relevant dollar value.
Adjust sold/fulfilled quantities - Adjust quantities of existing channels, dead inventory, or product giveaways on the Product screen, select the "pencil" on the relevant box you'd like to adjust.
Add general adjustments - If you'd just like to make a bulk adjustment to get it over with, go to the COGS screen, click "+ Report per channel", select COGS, Custom period (01/01/2023 - 12/31/2023) and "Multi-channel" as a sales channel. Then, input a negative amount to increase your inventory value or a positive amount to decrease your inventory value. Note that this will affect your COGS in the P&L and your gross and net profit accordingly.
I don't have a physical count or valuation available. How do I estimate my inventory value?
I don't have a physical count or valuation available. How do I estimate my inventory value?
If you can't conduct a physical count of your inventory and you are using an estimated inventory balance for year-end, please note the following:
Many of our customers rely on the 3PL/warehouse vendor to provide the count of units stored in the warehouse as of 12/31/2023, or, those selling on Amazon (or other marketplaces with fulfillment), may use Amazon's reports to obtain the number of units stored at Amazon’s warehouses.
Once you have the quantity of your products in the warehouse(s) as of 12/31/2023, you can estimate the cost per unit (if it's not already available). Then, you can either use the average cost per unit or provide a more specific breakdown by analyzing different cost layers (calculating the cost per unit for each layer based on the purchase order data of each layer).
Once you have the number of units and the estimated landed cost per unit (which should include all allocated costs per unit), you can calculate the inventory value by multiplying all costs per unit numbers and the quantities.
What about my Inventory in-process / Inventory in-transit balances?
What about my Inventory in-process / Inventory in-transit balances?
Inventory in-process / in-transit balances can be edited through the inventory Purchases page, by changing the dates of the shipped/received purchases.