Merchandise inventory is an accounting term referring to the sellable goods a company has on hand and can sell to consumers. Sometimes referred to as just inventory, it is considered to be a type of asset. For retail companies that sell merchandise, merchandise inventory appears on the business's balance sheet. It is an assessment of the total value of the physical merchandise a company has on hand and available for sale.
A balance sheet is essentially a summary of the financial picture of a company at a certain date and time. Along with assets, including merchandise inventory, a balance includes the company's liabilities and the total worth, also known as net worth, of the company. Investors use information from a balance sheet like merchandise inventory to make an assessment of the value and financial stability of a company.
Keeping track of merchandise inventory is an important part of loss prevention. Reducing loss of inventory can include increasing company security, sales floor supervision, and regular inventory of company merchandise by an independent inventory company. Increasing company security to reduce loss of inventory involves supervision of inventory from when it is received to when it leaves the store in a sale. By leaving no movement of the merchandise unaccounted for, a company can reduce losses and may be able to identify and eliminate the source of losses when they occur.
Checking merchandise quantities upon arrival is a vital step in ensuring no inventory was lost or forgotten in shipment. Once inventory is in a store, the business can use methods like surveillance, employee bag checks, and attentive customer service to reduce loss of inventory through theft. Since most inventory theft comes from employees, employee bag checks and sales floor supervision can be an embarrassing, but necessary, routine.
Tools used to keep track of merchandise inventory include sales records, inventory software, and inventory devices. To ensure an accurate assessment of merchandise inventory that is independent from the people charged with managing the inventory, a company might hire an outside company that provides professional inventory services. When an outside inventory service assesses inventory for a company, it usually means they travel to the location where the inventory is stored and count the inventory in person. This is sometimes done by hand with a paper ledger to record amounts, but is most frequently done with a computer system and devices that scan merchandise tags to record inventory.