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Performing a parts inventory reconciliation

November 23, 2010

Without a complete picture of his current parts inventory value, a dealer cannot make qualified decisions that ultimately affect the profitability of the parts department. Getting the parts and accounting departments to work together results in a more cohesive team with more information on which to base business decisions.

Performing a monthly parts inventory reconciliation takes a coordinated effort that is well worth it from Section 1 (to be completed by the parts manager) Compute the Physical Inventory The computer-generated or hand-counted inventory Add new and used cores Add non-genuine parts Add pending credits Add service and body shop works-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 (to be completed by the office manager) Compute the Accounting Inventory.

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 both standpoints-teamwork and accurate information.

The NADA offers a formula to compare the inventory dollars in the parts and accounting departments. The totals should match. The formulas are excerpted from an NADA Management Guide, "A Dealer Guide to Performing a Monthly Parts Inventory Reconciliation." The guide can be ordered at 800-252-6232, ext. 2. Cost plus shipping is $10 for NADA members, $20 for nonmembers.