How do I check a lumber yard’s point-of-sale and inventory system reports?
Ask for reports from the point-of-sale and inventory system, then test them against each other, the shelves and the financial statements. Pick a few product lines and count them yourself. If the system says one thing and the yard shows another, find out why before you trust any total it produces.
Reports are only as honest as the habits behind them. Ask how items are received into the system, how they are adjusted when lumber is cut, damaged or returned, and who is allowed to make those changes. A system that anyone can adjust is a system you cannot lean on.
Run a spot check. Choose a handful of product lines, some fast-moving and some that have sat, and compare the system count to a physical count. Look at sales reports and ask whether the product mix matches what you saw in the yard. Check that sales reported in the system line up with deposits and with the sales shown in the financial statements.
Look for stale stock. Ask for a report on items that have not moved and ask how the seller treats them. Treated and specialty wood can sit for a long time. Ask who can export the data, and whether you will get full access after closing. Your accountant can review the reconciliation, and a clear set of questions from the due diligence guides keeps the review orderly. Also ask what the system cannot show, such as items sold off the books or stock kept in another lot, because gaps in the data are as informative as the data.
Key takeaways
- Compare system counts with a physical count on a few product lines.
- Ask who may adjust inventory, and how those changes are logged.
- Confirm you will have full access to the data after closing.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat is inventory
- 02Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
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