In the second installment of the series, Heather Smith advises on the strategic conversations accountants and bookkeepers should be having with their small business clients. Read on for a list of key questions you should be asking in order to assess your clients' business health and why it's so important.

Recently, I visited my local doctors while I was battling a chesty cough. ‘Can you give me something to get rid of this cough?’ I asked. While I was there, she noticed a blemish on my shoulder, and asked if a skin specialist had checked it out. With my pale skin, and living under the harsh Queensland sun, I’m pretty vigilant when it comes to my skin. I’d thought the blemish was a little scratch from my dog and so I ignored it – for weeks. But thanks to the doctor’s prompt I decided to visit a specialist, and the ‘little scratch’ was diagnosed as basal cell carcinoma (BCC), a type of skin cancer, and was quickly cut out. I’m perfectly fine now. But imagine if the doctor hadn’t raised her concern? If she’d not taken a few moments to consider my overall health?

This experience led me to thinking that accountants and bookkeepers are in a prime position to look at the overall health of small businesses. While you may feel you’re engaged only for compliance work, you’re actually in a unique position to have strategic, thought-provoking conversations with the owners and managers, which may result in improvements to their overall business operations.


With that in mind, I’d like to encourage you to ask your small business clients some key questions about their existing inventory management solutions. (Of course there are all sorts of different ways you can help this business – but this is an inventory blog so today we’re talking about inventory)

Of course, you may be hesitant to broach the topic – perhaps you feel you don’t have a strong enough understanding of inventory management, or you worry it might open a can of worms you can’t reseal, or maybe you simply don’t have the time to help a business sort out their inventory problems, or you might just think it’s none of your business... there are endless reasons why you might think the subject is best left alone.

However, it only took a few moments for the doctor to point out something important to my health, and for me to act upon it. Likewise, your clients may simply need a quick brainstorming session to encourage them to think about their existing inventory management solutions, and whether these are fit for purpose.

So, here are my suggested questions. I’ve also added some notes about each question to help you explore potential solutions with your clients.

Do you have inventory?

Assuming that’s a yes – excellent! Time for some trickier questions...

Is inventory listed on the balance sheet? If not, why not?

Sometimes, as businesses evolve, they almost miss the fact that they are increasing the volume of goods they are purchasing and on-selling, and in fact they need to be recording it and defining it as inventory. Maybe it’s small now, but, depending on the growth projection of the business – you should make a note to talk to your client about inventory management again in the future. Or maybe the inventory needs to be moved across from expenses into assets now? If so, this is something you can work with your clients on now.

Is the dollar value of the inventory listed on the balance sheet accurate?

If not, why not – and what would it take to establish an accurate dollar value? As you know, your clients really need to have an accurate dollar figure sitting in their accounts at the end of the financial year. Is defining this figure a long and cumbersome process?

How is the small business currently managing its inventory?

Is your client using a specialised inventory management solution, their accounting software solution, complex spreadsheets, or perhaps relying on simple brain-power? What is their workflow? How do they deal with anomalies like giveaways? As their advisor, if you think their current practices are not delivering optimal performance, consider suggesting that the business investigates these further.

How much inventory is the small business writing off?

Look at the expenses over past periods. A trending high value in relation to the total inventory dollar is of concern.

What is leading to inventory write offs?

Damage, theft, technical obsolescence? Are there strategies in place to reduce future write-offs?

Is inventory availability meeting customer demands?

Would inventory alerts, automatic inventory ordering and improved inventory management improve this?

Are you able to determine inventory data on individual inventory items?

If you could quickly see the gross margin of the inventory items, would it assist you to understand what’s generating a profit?

What are your inventory management pain points?

Give the business manager the opportunity to articulate any additional problems not identified using the previous questions; for example, maybe they need serial number tracking, extra lighting in the warehouse, or they have custom and importation issues, etc.


I suggest you grab a few of the key questions above, restructure them into your own voice, and communicate them with clients when appropriate, whether in your next email, at the next client meeting, or by proactively suggesting a client meeting focused on discussing inventory. Potential outcomes and next steps, depending on the responses above, may lead you one of several ways:

  1. The solution your client has in place fully meets their business needs, so no action is required – and you’re so impressed you might even recommend it to other clients!
  2. The current inventory management solution is sufficient; however, if the business grows, it will need to explore more robust options. For now, simply make a note to follow up on this conversation periodically.
  3. The current inventory management solution is almost sufficient; however, a few tweaks will make it far more efficient for the business. Recommend that the business talks to the inventory management solution’s support team to see if the required tweaks can be achieved using the existing solution or if they have the desired features mapped out on their timeline. Cloud-based solutions often implement small modifications quickly, if they understand what you need, they may be able to incorporate it into their plans. TradeGecko's support team can be reached at if you have any feature or integration-specific questions.
  4. The business’s operations and profits are suffering as a result of an inadequate inventory solution. Implementation of a robust inventory solution is essential. Recommend that the business forms an implementation team to oversee the planning and roll-out of an appropriate inventory management solution. As the business’s advisor, you may offer to step up and take the role of their inventory specialist, or prefer to simply oversee the financial element of the solution’s implementation.

Accountants and bookkeepers are in a key position to help their business clients in all sorts of different ways. Nurturing these relationships with financial acumen, insightful observations and robust conversations, will be beneficial to both businesses.

A quick reminder of the suggested inventory questions:

  • Do you have inventory?
  • Is inventory listed on the balance sheet? If not, why not?
  • Is the dollar value of the inventory listed on the balance sheet accurate?
  • How is the small business currently managing its inventory?
  • How much inventory is the small business writing off?
  • What is leading to inventory write offs?
  • Is inventory availability meeting customer demands?
  • Are you able to determine inventory data on individual inventory items?
  • What are your inventory management pain points?
Image Credit: Unsplash

About the author

Heather Smith is an accountant specialising in content creation. She hosts the Cloud-Stories podcast, authored Xero for Dummies, and develops blog content and training videos for business within the Xero community.

See also:
[Interview] The changing role of the accountant: providing cloud-based solutions for businesses

Using Cloud Computing to break inventory management bad habits

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