Ray White Company: Evaluation of Periodic Inventory Management System

This report provides an analysis of Ray White Company's periodic inventory management system. It begins by introducing Ray White Company, a prominent real estate firm in Australia, and its performance over the years. The report then delves into the importance of inventory management systems and how Ray White utilizes a periodic inventory system for optimum inventory control. It explains the process of physical inventory counts conducted by the company monthly, unlike competitors. The report also covers the reasons for choosing this system, its effectiveness, and the journal entries involved in calculating the cost of goods sold. Finally, it outlines the advantages, such as reconciliation of purchase and issue, increased accountability, and reduced wastage, as well as the disadvantages, including time consumption and potential delays in business operations. This analysis showcases how Ray White leverages its inventory management system to enhance its overall performance.

Periodic Inventory
System
A system of inventory management.

Ray White Company:
With one real estate office in Queensland, the journey of
Ray White Company started way back in 1902. Today, after
110 years the company has become a well-known real estate
name in the country. The annual turnover of the company
has increased to AU$27 billion and the management expects
the growth in revenue to continue in the long term future
("Selling Property With Ray White", 2019).

About the company
• A household name in Australia, Ray White has become
synonymous with the real estate industry in the country.
• From one solitary office in 1902 the company currently
has more than 1,000 offices in all across the globe.
• In 2017-18 the company sold property worth more than 45
billion to become one of the biggest real estate companies
in all across the globe.

A family owned business
• The company is still a family owned business.
• The expansion of the company is quite staggering considering the fact
that it is still a family owned business as mentioned in the previous point.
• The company with more than 116 years of experience in the field of real
estate and property dealings have managed to build a huge reputation in
the market.
• The company currently operates in Residential properties., commercial
properties, rural and livestock., projects., property management, marine.
Hotels, concierge, insurance and business sales.

Performance of Ray White
• The company which started with a single office in
Queensland is now the largest real estate company in
Australia and New Zealand.
• The performance of the company can be gauged from its
ever improving sales and profit figures.
• Since 2010-11 the company has managed to increase its
sales and profit at stable pace.

Sale and profit graph

Inventory management system
 Inventory management system is an extremely important
and crucial part of overall management of an
organization.
 The operating efficiency and success of an organization to
a large extent is dependent on the ability of the
organization to manage its inventories efficiently.
 Optimum utilization of inventory is only possible if an
organization has an effective inventory management
system in place.

Inventory management system of
Ray White
• Established in 1902 Ray White is the most successful operator in real
estate business in Australia at present and its effective inventory
management has played a crucial role in the elevation of the
performance of the company.
• The management of an organization determines the system or controls
to be used to manage its inventories with the objective of optimum
management and control of inventories.
• The management of Ray White Company has selected Periodic inventory
management system to control and make optimum utilization of its
inventories in the operations of the company.

Periodic Inventory System
• In periodic inventory management system the ending
inventory of an organization is updates only when the
physical inventory count is conducted.
• Physical inventory count is a time consuming process
especially for an organization which has significant
quantities of inventory at its disposal.
• Thus, even large entities conduct such physical count of
inventories only once in a quarter.

Accounting system
• The ending inventory balance is updated in the accounts
of the company only when the company conducts physical
count of inventories.
• Physical counts require the management to conduct
physical count of inventory on periodical intervals.
• Ray White conducts physical inventory count once in
every month (Glazebrook, Paterson, Rauscher &
Archibald, 2017).

Reasons for Periodic Inventory
system
• The reason that the management of Ray White uses periodic
inventory management system is due to the efficiency of the
system in managing the inventories.
• The wastage of resources has reduced significantly subsequent
to the implementation of Periodic inventory management system.
• Better utilization of inventory has become possible with the use
of periodic inventory management system (Ferguson &
Koenigsberg, 2018).

Reasons of Periodic inventory
management
• Physical count of inventories helps the management to reconcile the
purchase and issue of inventories with the actual utilization of inventories
in business operations.
• Any difference between the issue and actual utilization of inventories will
be identified and unearth with the help of the inventory management
system.
• Improved performance of the company by better management of
inventory.
• Physical counts have made it possible to reconcile the issue of inventory
items with the outcome.