How do I verify a jewellery store’s consigned versus owned inventory?
Ask for every consignment agreement and the current list of consigned pieces, then match the list to the case, tag by tag. Anything on that list belongs to someone else. Compare the rest to supplier invoices and payment records to confirm the shop owns it outright.
Consigned pieces look identical to owned ones in a case, so paper is the only reliable divider. Ask for each agreement with a maker or dealer, the terms for returning pieces, and the latest statement of what has sold. A shop that cannot produce these may be carrying pieces it cannot account for.
Next, test the owned stock. Choose a sample of pieces and look for the invoice that shows the shop bought it and whether that invoice has been paid. Unpaid invoices make the stock a liability. Ask also about pieces held on approval for customers and goods sent out to shows or other stores. They may not be in the case but they may still be on the books.
Look at how the books treat the two groups. If consigned pieces were counted as inventory, the shop’s assets look larger than they are. Your accountant can compare the inventory figure to the paper trail. Raise the matter in the purchase negotiations, so the agreement lists what transfers and what is returned to the makers before closing. Do not leave it for the first week of new ownership, when everyone is busy and nobody remembers the terms.
Key takeaways
- Collect every consignment agreement and a current consigned-piece list.
- Match tags in the case to that list, piece by piece.
- Sample owned stock against supplier invoices and proof of payment.
- Check whether the books counted consigned pieces as owned inventory.
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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
- 03Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
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