Business Accounting: Buying and Monitoring Inventory Supplies
In addition to inventory, all businesses must buy supplies that are used to operate the business, such as paper, pens, and paper clips. Supplies that aren’t bought in direct relationship to the manufacturing or purchasing of goods or services for sale fall into the category of expenses.
When it comes to monitoring the supplies you use, just how closely you want to watch things depends on your business needs. The expense categories you establish may be as broad as Office supplies and Retail supplies, or you may want to set up accounts for each type of supply used. Each additional account is just one more thing that needs to be managed and monitored in the accounting system, so determine whether it’s worth your time to keep a very detailed record of supplies.
Here are a couple of ways that businesses handle the management of inventory supplies:
Many companies don’t use the bookkeeping system to manage their supplies. Instead, they designate one or two people as office managers or supply managers and keep the number of accounts used for supplies to a minimum.
Other businesses decide they want to monitor supplies by department or division and set up a supply account for each one. That puts the burden of monitoring supplies in the hands of the department or division managers.
Your best bet is to carefully track supplies that make a big dent in your budget with an individual account. For example, if you anticipate paper usage will be very high, monitor that usage with a separate account called Paper expenses.