Accountant for Langley inventory businesses

Closing stock decides the year

Cost of goods sold is opening inventory plus purchases less closing inventory, which means the number you write down at year-end moves profit directly. It is the one figure in a retail or distribution business that is both material and largely determined by your own process. A count that is rushed, or a valuation basis that changes quietly from one year to the next, produces a result that is hard to explain later. Choosing a basis and applying it consistently matters more than which reasonable basis you choose. See our inventory accounting guide.

What actually belongs in the cost of stock

Inventory cost is not simply the invoice from the supplier. Freight in, duty and the direct costs of getting goods to a saleable condition generally belong in the cost of the stock rather than being expensed separately — while storage of finished goods, selling costs and general overhead usually do not. Businesses that expense everything on arrival understate inventory and overstate the year’s costs; the correction usually arrives at the least convenient moment. For a Langley distributor bringing goods across a border, freight and duty alone can make this a material difference.

Shrinkage, spoilage and obsolete stock

Every inventory business loses some. Breakage, theft, spoilage in food and beverage, and stock that simply stops selling are all real, and all need to be recognised rather than left sitting on the balance sheet at full value. Obsolete stock carried at cost inflates both your assets and your profit, and the longer it sits the harder the eventual write-down is to support. A regular review is cheaper than a large one-off adjustment, and far easier to justify.

GST, PST and the mix you sell

Retail and food businesses in BC deal with both taxes and with a product mix where treatment varies line by line — some items are taxed, some are not, and packaging or bundling can change the answer. Input tax credits on the purchase side need to be captured properly, particularly where you are buying inventory in volume. Getting the point-of-sale set up to reflect the rules correctly is a one-time job that prevents a recurring reconciliation problem.

Seasonality, cash and the stock you are holding

Inventory businesses tie their cash up in things on shelves, which makes a profitable year and a comfortable bank balance two different states. It also makes instalments easy to misjudge, because tax is calculated on profit rather than on liquidity. Where a Langley retailer builds stock ahead of a season, the cash pressure and the tax bill can land in the same quarter. We plan instalments against the actual cycle rather than a flat projection, so that timing is anticipated rather than survived.

Point of sale, online sales and one set of numbers

Most Langley inventory businesses now sell through more than one channel — a physical location, an online store, sometimes a marketplace or wholesale on top. Each system reports differently, and the common failure is not fraud or error but reconciliation: three sources of truth about the same stock, none of which quite agrees with the others at year-end.

Getting this right is mostly a setup problem rather than an ongoing one. Sales tax needs to be configured correctly per channel, because an online sale to another province may not follow the same rules as a sale over the counter. Stock movements need to flow to one place so the closing figure is a count you can trust rather than a reconciliation you dread. And fees deducted at source by a platform — taken before the money reaches you — are still business expenses and still deductible, which is a deduction routinely missed by owners who record only the net deposit.

We set the flow up once, then keep it reconciled through the year so the year-end is a confirmation instead of an investigation.

One more thing worth setting up early: know your margin by product line rather than in aggregate. Inventory businesses frequently carry a category that looks busy and contributes very little once freight, shrinkage and the shelf space it occupies are attributed to it. Because the stock keeps moving, the problem hides in a healthy-looking turnover figure. Attributing costs properly at the line level turns that into something you can act on, and it is the same discipline that makes the year-end inventory number defensible.

What EverStone handles for you

One CPA, one fixed fee agreed up front:

• T2 corporate return and year-end financial statements
• Inventory valuation basis set and applied consistently
• What belongs in stock cost, established and documented
• Shrinkage and obsolescence reviewed rather than deferred
• GST and PST treatment across a mixed product range
• Input tax credits captured on volume purchasing
• Instalments planned around the stock and sales cycle

Fixed fees, fully online

EverStone is an Abbotsford CPA firm and the engagement runs entirely online — video, phone and secure upload — so nobody has to cover the floor while you go to a meeting. The fee is fixed and agreed before work starts. See what it costs.