Direct Sales Inventory Management in 3 Easy Steps

No matter how long you’ve been in direct sales you probably know that managing your inventory can be one of the hardest parts of your business.

But it does not have to be!

There is a lot of confusion about inventory management for direct sales.

1. Do you have to track it?
2. What if you use products for personal use?
3. What if you give product away as incentives?

How do you handle these things?

In this article I am going to answer all those questions and show you how to completely manage your inventory in three easy steps!

For starters, do you need to track your inventory?

According to the IRS you must “use a method of accounting for inventory that clearly reflects income.” How are you going to accurately account for your income and expenses without tracking inventory? So yes, if you hold inventory for resale it is a good idea to track it. Remember that cost of goods sold (COGS) is a write-off.

What if I use products for personal use?

If you are receiving the products for free, the retail value shows up on your 1099 provided by your company as income at the retail value. You will need to remove the products you use personally from inventory while still reporting the income as you earned the free product.

If you paid for the product at full price or using your discount you still want to remove the product from inventory but you will not be able to add their value to cost of goods sold (COGS) as a tax deduction.

What if I give products away as incentives?

I get this question all the time. It is a great question! If you give a product away as an incentive, it is now an advertising expense and not a cost of goods sold. If it was free product from your company (1099 as above), it still shows up as income. Now instead of deducting your cost, which is the cost your company says you earned for that product when you received it, as COGS when you sell the product, you now deduct that cost as advertising expense.

Similar to using products for personal use above, if you paid for the product at full price or using your discount you still want to remove the product from inventory but now you will use the actual amount you spent on the products including tax and shipping as an advertising expense.

Now we have the answers to those questions, let’s find out how to use Direct Sidekick’s inventory management software to make this super simple.

Direct Sales Inventory Management in 3 Easy Steps

Step 1: Import your product list.

The first step is simply making sure the product list has been entered into Direct Sidekick. You can either import the full list or enter your items one at a time.

• To import navigate to the Products page under the Inventory menu tab
• Once there, click on the Import Products button.
• Click the choose file button the select your CSV file containing your list. Now match the column names in your file with our field names. Then click import data and you are done.
• You will receive an email when the full import is completed.

Step 2: Add units of your products into inventory using purchase orders (PO’s).

Purchase orders are used to add product into your inventory. Most customers match the PO number they receive from their company for easy lookup later.

• Enter the shipping & handling amount you were charged by your company as well as any tax that was applied to it.
• Search for and add the products to your PO.
• Enter the number of units and your cost per unit.
• Select whether you were taxed on the product or not.

Step 3: Remove units of your products from inventory using invoices.

• Navigate to the Invoices page under the Inventory menu tab.
• Once there click on the New Invoice button.
• Now complete this form with whichever products you would like to invoice your customer for and/or remove from inventory and save it. Pay close attention to the Add to Income checkbox. If it is checked the grand total of the invoice is added to income. If the amount you are getting paid is deposited to a bank account you are importing to Direct Sidekick this will be adding the amount twice which you do not want.

When stock is removed from inventory, the costs associated to the items is automatically added to Cost of Goods Sold. Do not add a separate transaction for the cost of goods sold.