Chemical Inventory Management Systems Can Help Reduce the Burden of Month-End Inventory
Most laboratory directors do not enjoy accounting; that may explain why they became scientists. However, due to job responsibilities, some laboratory directors cannot escape becoming involved in accounting related questions, especially in regard to tracking month-end chemical inventory.
According to the generally accepted accounting principles (also known as GAAP), the inventory balance recorded on the balance sheet needs to be accurately updated every month. In addition, the amount of chemical inventory consumed each month needs to be recorded on the income statement. The general calculation used to arrive at these numbers is a rather simple mathematical equation:
Beginning Inventory + Material Purchased During the Month – Ending Inventory = Inventory Consumed
Although the formula is straightforward, obtaining the details necessary to perform this equation can be difficult. To illustrate the challenge, let’s consider two different companies and the methods they apply to obtain and record their month-end chemical inventory numbers:
Example 1 – Manual Tracking
Company A owns a laboratory that uses and stores various chemicals and reagents over a one-month period. At the end of the month, their accountant approaches the laboratory director and requests the following information:
- A list of chemical purchases that occurred during the month.
- The current amount of chemicals stored within the laboratory.
The laboratory director begins working immediately. First, he gathers all of the purchase orders and invoices paid during the month. This helps him come up with a list of chemical purchases, which he records in a spreadsheet for the accountant.
However, getting information for the current on-hand chemical amounts requires some more time. He calls a staff meeting, distributes a blank paper to each member, and asks them to go and count the chemical inventory. He requests that his staff list the name of the chemical and the on-hand amount on the paper. Oh, and this will require everyone staying late on the last day of the month in order to be accurate and on time.
After some grumbling, the team gets to work. Once completed, an administrator records the results on the computer. This information then sent to the accountant. The total time on this request – approximately one hour for each staff member, or 20 hours total, plus an additional two hours for various administrative tasks.
Example 2 – Automated Tracking
Company B is nearly a carbon copy of Company A, expect they have implemented a chemical inventory management system with a barcode tracking system. At the end of the month, the accountant makes the same request to the laboratory director.
While the accountant is standing there, the laboratory director quickly prints a report showing everything that was purchased, received and paid for over the course of the month. He then prints a second report detailing all the chemicals that were consumed during the month. Total time for completion – less than 5 minutes.
Reducing the Pain of Chemical Accounting
Chemical management systems are designed to track the “ins” and “outs” of chemical inventory in real-time. This is accomplished through barcoding technology that allows inventory to be scanned when it is received, stored and consumed. This reduces the total amount of time that laboratories spend on chemical management.
Leave the accounting to the accountants. With a chemical inventory management system, laboratory directors can focus on what they enjoy most – science. For more information on BIOVIA CISPro and how it can be implemented in your laboratory, please visit our website today.