Last In, First Out ( LIFO) Accounting Solutions
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SourceCorp has specialized in LIFO accounting since 1983. As the largest company in the nation that specializes in LIFO accounting, we have provided LIFO accounting services, software and consulting to thousands of businesses and their CPA’s. It is our mission to make LIFO safe, easy and cost effective for businesses of all sizes. Our clients have year ending inventories that range from as low as a few thousand dollars to billions of dollars.
We specialize in LIFO so you don't have to
We combine the research, technology and experience necessary to maximize the benefits of LIFO. You will rest assured knowing our team of LIFO accounting specialists is up-to-date on all the latest LIFO regulations – And, we are only a phone call away to address all of your LIFO needs. A full-time Account Manager is assigned to each client and CPA and stands ready to promptly answer any question (technical or not) he or she may have. As a matter of fact, our customer service team consistently receives exemplary scores on annual client and CPA satisfaction surveys.
Our clients and CPA partners feel secure knowing there are specialists standing behind their LIFO calculations. As a matter of fact, we will defend our methods and procedures, at no cost to the client, if they are ever questioned in an IRS audit. Wiith SourceCorp’s full-service approach, LIFO accounting has never been easier or safer. We can take care of everything--from the initial election forms to the final calculations. Put our LIFO expertise to work for your business or client today.
LIFO ACCOUNTING - WHAT IS IT?
Most people know LIFO is an acronym for “Last In, First Out” accounting; however, many don’t know it is a great source of additional cash for their business!
All businesses need more cash. Unfortunately, it's not easy to produce more working capital from a well-run business. That is, until you consider LIFO. By electing LIFO, you can reduce taxable income and pay less tax. The tax you save becomes cash in your pocket.
With LIFO, you can benefit from inflation, high inventories and high tax rates. LIFO uses these negative events to build a fund of cash that can be used by the business owner as he pleases for as long as he wants. When the time comes to pay back the fund, no interest is due. The profit is left for the business owner!
Best of all, a LIFO election won't interfere with the ordinary course of business. Nothing changes but the way you report income.
HOW LIFO WORKS
In a nutshell, LIFO subtracts inflation from inventory costs, deducts it from taxable income, and records it in a LIFO Reserve account on the books. The LIFO benefit grows as inflation widens the gap between current year and past year (minus inflation) inventory costs. This gap is called the LIFO Reserve. The tax savings from the yearly deduction can be invested separately or re-invested in the business. Either way, the investment becomes a profit center for you!
With LIFO |
Without LIFO |
|
| Revenue | $35,000,000 |
$35,000,000 |
| Cost of Goods Sold | $30,600,000 |
$30,000,000 |
| Operating Expenses | $1,500,000 |
$1,500,000 |
| Taxable Income | $2,900,000
|
$3,500,000 |
| Income Taxes @ 35% | $1,015,000 |
$1,225,000 |
| Cash Flow | $2,485,000 |
$2,275,000 |
| Extra Cash | $210,000 |
$0 |
| Increased Cash Flow | 9.23% |
0% |