Custom «Memo of Inventory Recommendation» Essay Paper Sample

This memo aims at addressing your concern regarding the inability of your business to meet its income tax obligations. The memo advices on the best inventory practice your business should adopt in order to cut down cost on income tax. It provides a detailed justification to its advice and will be highly invaluable to your young business organization. The findings of the memo are informed by research and analysis on prevailing market conditions.

Problem

I am aware of the tough economic times the global economy is undergoing. It has become indeed a task to promote profits especially so in young businesses following the currency crisis being experienced globally. Adopting the best inventory practice for your business therefore becomes a priority financial rescue package. Proper inventory keeping is known to cut down on costs imposed by income taxes. It may be one of the few occasions a business organization exercises freedom on determining its expenses. Such freedom can only be manipulated to the organizations advantage with proper skill and information.

Aware of this problem and with an aim of eradicating it, I sort to investigate on the best inventory practice that would suit your organization. I examined the various occasions in which the different inventory keeping methods are applied. In addition, I compared the various merits and demerits that come with each method in an attempt to identify the most suitable one for the situation. Finally, I carried out an analysis on the effects the advised method will yield to your organization and was convinced that it would immensely improve your situation.

LIFO Inventory Keeping

From my findings, LIFO (Last in First Out) method of inventory keeping would be the most suitable practice for your organization. My conclusion was advised by a variety of sources not limited to economic and financial books and a keen study on the economic trends in the market for your goods.

The main cause of the problem in your organization is the increasing cost of inventory. Escalation of prices, for purchasing products, due to adverse weather conditions accounts for the increasing cost of inventory. In such economic trends adopting LIFO inventory helps cut down on income tax. LIFO inventory presumes that the goods that were last bought are the first to be sold. This method of inventory keeping assumes that the highly valued goods that were bought most in recently are sold first. It therefore perfectly suits your business situation and provides an opportunity to cut down on income tax.

It is also important to note that due to the economic prices being increased in the market, prices of products are likely to continue escalating for quite sometime. However, you will need to adopt the same method (LIFO) in preparing your financial statements.

It is my sincere hope that this advice will be found invaluable by your organization and that its adoption will not be regretted. I am convinced that it will be greatly beneficial to you and will help save on income tax. The changes you will need to carry out are achievable and there is absolutely no cause for alarm.

I will be pleased to discuss this recommendation and advice with you any time, and closely monitor your progress.