Tax Implications On Inventory Optimization

Taxes are a huge burden on small business. Phitch is the only solution on the market to set inventory levels based on your taxes.

How much income you have after taxes does impact how much you can afford to tie up in inventory.

In today's tough economy, you need every advantage possible.

Not all businesses are same - not all inventory strategies are the same.

Let Phitch set the right amount of inventory for your business.

Phitch - Tax Implications On Inventory Optimization

Inventory is one of the largest investments made by most businesses, yet it is often overlooked. In fact, inventory can often mean the difference between success and failure. Between the lack of experience and the access to appropriate technology, small businesses have not had the tools to make smart inventory management decisions. That is where ePhiphony Incorporated's patent pending solution, Phitch , comes in to guide small businesses to optimize their inventory at peak financial performance.

Phitch is the only small business technology solution to optimize inventory at maximum economic profit. Economic profit consists of four primary components: net income, taxes, capital, and cost of capital. Economic profit is capable of weighing each business entity type by weighing their tax rate.

For example, a study by the SBA showed that the effective tax rate by business entity type:

Non Farm Sole Proprietorships 13.3%
Partnerships 23.6%
S Corporations 26.9%
C Corporations 17.5%
All Small Businesses 19.8%

The study by the SBA also showed that the effective tax rate varied by industry, for example Sole Proprietorships varied as follows:

Agriculture 11.7%
Mining 12.7%
Utilities 4.1%
Construction 13.1%
Manufacturing 12.5%
Wholesale & Retail Trade 14.2%
Transportation & Warehousing 13.3%
Total All Returns 13.3%

The point to stress is that taxes vary and consequently not all inventory is the same. QuickBooks currently has no capability to factor the impact of taxes on inventory level, in fact no other solution on the market has this powerful tool - only Phitch.

Not all businesses are the same neither are your inventory strategies. The following examples below show how Phitch can optimize inventory for you!

Sample S Corporation versus Sole Proprietorship (ie different business structure)

Phitch automatically factors in the impact of taxes on inventory. To observe how taxes impact inventory, we can use Phitch's useful simulation tool to compare a tax rate of 26.9 to 13.3%. The end result is that Phitch adjusts the order quantity from 148 units to 153 units. Phitch also adjusts the safety stock from 60 units to 59 units. The impact to the business is $56.

This is for one item in a small business. Imagine how this can impact your business as whole.

Impact of effective tax rate on optimum inventory levels by Phitch

Sample Wholesale versus Manufacturing (ie different industry)

Phitch automatically factors in the impact of taxes on inventory. To observe how taxes impact inventory, we can use Phitch's useful simulation tool to compare a tax rate of 14.2 to 12.5%. The end result is that Phitch adjusts the order quantity from 436 units to 438 units. Phitch also adjusts the safety stock from 24 units to 23 units. The impact to the business is $35. This is for one item in a small business. Imagine how this can impact your business as whole.