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Lower Your Tax Burden with the Right Inventory Software

How tight is your company’s grip on inventory control? Not as tight as you’d like? If that’s the case, your company is probably also paying too much in taxes. There’s only one good thing about unnecessary costs. Where they exist, so too does the opportunity for savings. This article will help you better understand how your inventory control impacts your tax bill. It will also let you know how you can set about lowering it.

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Find out why thousands of businesses trust Find Accounting Software to help narrow down thousands of options to a managable list of top recommendations. There’s no pressure, no obligation, and no cost. Sound good? Let’s get started!

The companies and representatives you sent our way were prompt and thorough… I definitely would recommend your company as a means to exploring options with qualified providers. — Bruce Conley
Your service saved me some very valuable time and hooked me up with some excellent resources. Thanks for providing this top-notch service. — Linda Vittori
Thanks! Having a service like this to help navigate the ocean of accounting software and help identify potential good-fits without having to delve through numerous bad-fits is of tremendous value! — Mark Carpenter

Unlock the power of inventory costing — or, at least save some money with the right method

As you well know, your business is responsible for taxes on gross profit. Are your deductible costs all being captured, though? For many inventory-centric companies, cost of goods sold is the largest deductible cost. Strong inventory software helps you accurately capture your cost of goods sold figure. This is critical to ensure you aren’t missing deductions.

On the surface, determining the cost of goods sold seems fairly simple. You start with the value of inventory at the start of the year. You add the cost of inventory purchases during the year. Finally, you subtract the value of the year-end inventory. Behind the simple equation, though, lies complexity. That complexity can keep you from minimizing your tax bill.

There are multiple methods for inventory costing. Does your software support the costing method most beneficial to you? It can—with the right software choice.

The “cost” method tracks the cost of each specific inventory purchase. The IRS recognizes though that certain business realities can make the cost method prohibitive. High inventory turns, for instance, may make this approach impractical. Further, changes in the market can increase or reduce the real value of your inventory. The “market” valuation model is an alternative—and potentially better—option in many cases.

In an inflationary economy, your most recent inventory purchases are likely your most expensive. For some companies, a LIFO (last-in, first-out) approach to inventory costing can increase your end of year inventory value. For others, a FIFO (first-in, first-out) approach will be most beneficial. Why is this important? By keeping the more expensive inventory stocked in your books, your tax burden decreases with a lower gross profit figure. The IRS provides specific rules for which costing model can be used when. Also, not all software provides LIFO and FIFO valuation tools.

Qualified software providers can present inventory software that offers the right level of functionality for your case. With your accountant, they can advise you on which costing system is best for you. Utilizing the right software, along with the right costing model, you can make sure your tax bill isn’t larger than it needs to be.

Reducing inventory property taxes

If your company operates in a state with inventory property taxes, you are probably painfully aware of that very fact. While many states have eliminated inventory property taxes, there are still a number which levy the tax. What’s the business solution to inventory property taxes? For many companies, it means keeping less stock on hand at the specific time the inventory valuation is made.

Of course, there’s a risk to reducing stock. The gamble is that the tax savings outweigh the negatives related to carrying low inventory levels. Namely, we are talking about risks such as reduced sales on out-of-stock items or fallout from customer dissatisfaction with fewer choices or delivery delays. Smart companies look to mitigate these risks with intelligent inventory control practices.

If you don’t have solid data from your inventory system, it becomes very difficult to prepare for planned inventory reductions. Generally, the key to minimizing risk associated with lower stock levels centers around reducing the right inventory. Inventory software with strong reporting features can make this possible. With good data, you can much more easily identify trends. For instance, many companies have seasonal sales trends for specific products. Virtually every business has faster or slower selling products. Software can also track which products can be provisioned quickly, if you need to fulfill a back-order.

For businesses subject to property taxes on inventory, reducing inventory will reduce your tax bill. The trick is getting access to the right data to avoid also reducing your sales. That’s where software comes in. Carefully selected, properly deployed inventory software provides the means to help you lower your tax bill without sacrificing revenue.

Key takeaways

  • Inventory and how it’s tracked impacts your business tax bill
  • The right inventory costing method can lead to substantial savings
  • Inventory property taxes can be lowered with intelligent inventory control

Popular Inventory Control Software Products

Looking for great inventory control software options? Below you can check out a list of the products most commonly considered by others searching for inventory control software. The list on this page is based on many years of real software matches. But everyone’s needs are different. Browse for fits with your specific requirements or let us help you identify your top options.

Which software is right for you? Get quick and accurate recommendations.

What if you could simply tell someone about your software needs and they’d find your best choices? Look no further. We’ll listen to your needs and find your top software matches. That’s it. There’s no pressure, no cost.

The companies and representatives you sent our way were prompt and thorough… I definitely would recommend your company as a means to exploring options with qualified providers. — Bruce Conley
Your service saved me some very valuable time and hooked me up with some excellent resources. Thanks for providing this top-notch service. — Linda Vittori
Thanks! Having a service like this to help navigate the ocean of accounting software and help identify potential good-fits without having to delve through numerous bad-fits is of tremendous value! — Mark Carpenter
  • SAP Business One by SAP

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      VersAccounts was created to bring the power of a modern full-function ERP system to even the smallest business that needs it. It is a recognition of the fact that even small businesses with modest budgets have business operations that are every bit...

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    • E‑Syst by Rennie, Lindsey and Associates

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    • Visual Ledger by Aboard Software

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    • MISys Manufacturing by MISys

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    • SouthWare Excellence Series ‑ ERP Software by SouthWare Innovations

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    • Fusion Retail Management by Fusion Retail Management System

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    • ALERE Accounting by TIW Technology

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    • Small Business Consolidator by Aboard Software

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Your Inventory Control Software Recommendations

Ready to find out which software solutions are best suited for your needs? Great! Understanding that you’re motivated to find inventory control software gives us a great start. We’ve helped companies of all shapes and sizes meet their inventory control software needs. With a bit more information about your unique requirements, we’ll narrow down to your top options. Let’s get started!

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