Performing a Parts Inventory Reconciliation

Performing a Parts Inventory Reconciliation

If you donêt have a complete picture of current parts inventory value, you canêt make educated decisions that ultimately affect the profitability of the parts department. By implementing procedures that encourage the parts and accounting departments to work together, youêll have a more cohesive team as well as more current information on which to base business decisions. Performing a monthly parts inventory reconciliation takes a coordinated effort that is well worth it from both standpoints teamwork and correct information. Here is a formula to help you compare the inventory dollars in the parts and accounting departments. The totals should match.

Section 1: Compute the Physical Inventory (to be completed by the parts manager):

The computer-generated or hand-counted inventory $________________

Add new and used cores +_________________

Add non-genuine parts +_________________

Add pending credits +_________________

Add service and body shop work-in-process +_________________

Add miscellaneous adjustments not included in

the computer inventory +_________________

Subtract negative on-hand balances if the balances are

not subtracted from the computer inventory -_________________

TOTAL PARTS PHYSICAL INVENTORY =$________________

Section 2: Compute the Accounting Inventory (to be completed by the office manager):

The general ledger account balance for parts inventory $_________________

If the accounting balance is taken AFTER the parts

inventory,

Add service and body shop ROs and parts invoices +__________________

Subtract parts purchases -__________________

If the accounting balance is taken BEFORE the

parts inventory,

Subtract service and body shop ROs and parts invoices -__________________

Add parts purchases +__________________

Add receipt of parts before inventory but billed

after inventory +__________________

Subtract receipt of parts after inventory but billed

before inventory -__________________

TOTAL ACCOUNTING INVENTORY =$_________________

The above information was excerpted from NADA Management Guide SP.26, A Dealer Guide to Performing a Monthly Parts Inventory Reconciliation. You may order the guide from the National Automobile Dealers Association (NADA) by calling 800-252-6232, ext. 2 or 703-821-7227. NADA membersê price is $10; cost to non-members is $20 (both prices add shipping).