How do I count a linen service’s inventory of owned sheets and towels?
Count every single location at once: the plant, the trucks, the customer sites and the soiled and repair piles. Reconcile the count against the written records, sample items for wear and ask how losses and any customer-owned items are tracked.
Linen moves, so a count at one place proves little. Plan a day when the seller agrees to count everything in circulation at once: shelves at the plant, carts, trucks and the stock at customer sites. Count by type and size, and keep soiled, clean and awaiting-repair piles separate. Have your own person do some of the counting, not only the seller’s staff.
Compare your numbers with the inventory records and the purchase history. Where do they differ, and does the seller have an explanation? Ask how the company records new stock, loss, wear-out and write-offs. Linen that disappears at customer sites is a regular cost, so see how the plant tracks it and recovers it.
Then check quality. Pull samples from different piles and look for thin fabric, stains that do not wash out, frayed hems and faded colours. Stock that is mostly near the end of its life is a coming expense. Ask whether any linen belongs to customers, or is leased or financed. Your accountant can show how the stock appears on the balance sheet, and your lawyer can confirm what is included in the sale. Ask what the replacement rhythm has been so you can see how stock ages.
Key takeaways
- Count every location on the same day.
- Reconcile the count with records of purchases and losses.
- Sample the condition across the stock.
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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 CanadaGovernmentWhat is a balance sheet?
- 03Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 04Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
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