In today’s world, technology is a big part of all businesses, but in the portable storage container business inventory control still can be looking out into the container yard and a high stack of containers means that business is not good and a low stack of containers means that business is good.
However, there is more to it. Inventory control means knowing where all your sale and rental containers are and ensuring they are all accounted for at any given time. The containers in your rental fleet and in your sales inventory should to be accounted for several different reasons.
Operationally, you need to know what is coming off rent and when, what is going on rent and when, as well as what, is staying on rent. Furthermore, you need to distinguish between containers that can be sold when off hire and containers that cannot be sold when off hire.
For accounting purposes you need to know what is being billed, for what period at what rates, as well as, what changes in the billing is the result of on and off hires.
The financial prospective requires that you know how much you paid for your containers, when you purchased them and how much you have depreciated against them both for GAAP (Generally Accepted Accounting Principles) and for tax purposes.
To maintain good inventory control you need a system of some kind. There are several software programs that are suitable for portable storage companies ranging from small to big to be found among NPSA’s members. You can also create your own system by using a combination of basic software such as QuickBooks Online and Microsoft Access or Microsoft Excel.
Physical Inventory Reconciliation
It doesn’t matter how good of a system you use unless it is properly implemented and your company has a good discipline for using it. The reports produced by the system(s) should properly reconcile to the physical inventory. For instance, you need to check the yard inventory report against what’s physically in the yard at a specific time, for example quarterly. At the same time, you should check the on hired inventory against the list of containers that you are collecting rent from. You do that by looking at the rental agreements and check that there is a corresponding invoice for each container. In addition, you need to do site inspections and confirm the whereabouts of your rental containers. If your rental fleet is relatively large, it isn’t feasible to travel around and check on all on hired containers on a quarterly basis. However, it is a good practice to visit with slow paying customers frequently to make sure the container(s) they rent from you are at the location indicated in
the rental agreement. One can assume that a paying customer has his container, while that may not always be true, it is more likely than a non-paying customer not having his. Occasionally, you may want to confirm the location and inspect containers that have been on rent for a very long time. The total physical container inventory is the amount of the containers in the yard(s) plus the amount of containers out on rent.
Financial Inventory Reconciliation
Your financials reflects the container fleet in two places, first of all, on the profit and loss statement as rental revenue and secondly, on the balance sheet as fixed assets.
It is a good practice to reconcile the amount of the monthly or 28 day billing to the physical container inventory and to the rental agreements that generate the revenue. You should also reconcile the accounts receivables to the actual container(s) for which there is an outstanding invoice.
For the balance sheet reconciliation you should have a list of containers at their cost or capitalized value that corresponds to the total value of the fixed assets. Furthermore, you should have a list of containers showing the accumulated depreciation. The key is to do your accounting on a per unit basis so that you can see at any given time what the cost of a container is, how much it has been depreciated and what the cost of good sold would be if you sold the container.
Tax Inventory Reconciliation
This reconciliation is more or less identical with the Financial Inventory Reconciliation for the balance sheet; however, the accumulated depreciated value for each container should be the tax depreciation rather than GAAP depreciation. These numbers aren’t very important for the day to day operations of your company but a necessity at tax times or when you want to sell your business.
If you run your balance sheet on a per container basis, there should be a schedule to your tax return that shows the accumulated depreciation for your entire rental inventory as well as each individual unit.
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