Scribd
Upload
191 views4 pages

Inventory Count Process

This document discusses the importance of maintaining accurate inventory counts. An inventory count involves physically verifying the quantity and condition of items in stock, and is an important tool for inventory management. Periodic inventory counts can identify problems like damaged goods, help evaluate product performance, ensure business goals are being met, improve ordering processes, maintain correct pricing, and make theft transparent. The results of accurate inventory counts are crucial for financial reporting and effective business operations.

Uploaded by

Audit Department
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
191 views4 pages

Inventory Count Process

This document discusses the importance of maintaining accurate inventory counts. An inventory count involves physically verifying the quantity and condition of items in stock, and is an important tool for inventory management. Periodic inventory counts can identify problems like damaged goods, help evaluate product performance, ensure business goals are being met, improve ordering processes, maintain correct pricing, and make theft transparent. The results of accurate inventory counts are crucial for financial reporting and effective business operations.

Uploaded by

Audit Department
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

Inventory count

This article will explain the importance of maintaining inventory count. The


explanation of this financial management tool will help you understand
the importance of correctly-implemented inventory monitoring, and why this
is important for the business.

What is an inventory count?


An inventory count, or inventory counting, is the physical verification of the
numbers and condition of articles that are in stock which is a tool within
inventory management. This is often done in order to carry out an audit on
whether the technical bookkeeping stock matches the physical warehouse
stock. This is often the source of information to correct stock errors.

There are various inventory count methods used for inventory management.
Some companies choose to count their stock at certain times of the year,
whereas other companies choose to carry out rolling stock takes (cyclic
counting). An end-of-year inventory count is often used for reporting a
company’s year-end figures. During end-of-year stock takes, external
auditors are also present in order to test the correctness of the count.

Periodic inventory counting are often done for goods with low value. The
term ‘periodic’ may mean annual, seasonal, quarterly, monthly, weekly or
daily. High-value goods are often counted more frequently.

The value of the stock is part of what makes up the value of a company, and
it’s therefore crucial that the value of the stock according to the inventory
management system matches the physical stock in the warehouse, so that
the total value of the company can be presented in a correct manner.

Why is inventory monitoring important?


As explained above, inventory monitoring can identify stock problems and
shows businesses where potential problems are to be expected. Running an
effective business begins, in any case, with effectively maintaining stock.
Here are 6 reasons why you should regularly carry out stock takes.

1. Identifying inventory problems

Carrying out regular stock takes makes it clear if there are problems, such
as damaged stock, incomplete orders, stuck orders, bad inventory
management or errors in stock. The results of the stock take should be used
as a basis for closer investigation of these areas. Ensuring that there are
operational procedures to prevent or mitigate these situations. You should
ensure that procedures have been put in place that prevent the causes of
stock problems. This also applies to less common situations, so that orders
don’t stay in the system for an unnecessary length of time.

2. Evaluating the performance of a product

When there are many products in a catalogue, it’s sometimes difficult to see
which products make a positive contribution and which don’t. A stock take
can single out products that no longer move in terms of sales. For this
category of products, a strategy can be created if the solution is to remove
these products from the catalogue or to change their pricing.

3. Ensuring that the company fulfills its goals

If there’s a big discrepancy between the results of the count and the
bookkeeping administration, then processes are clearly not running as
expected. In these situations, it’s important that they are detected as quickly
as possible in order to manage them in a timely manner.

4. Improving stock ordering processes

An inventory count exposes discrepancies that you previously weren’t aware


of. In these cases, one is often tempted to order more stock in order to
compensate for low stock levels. This has a negative influence on a business’
‘cash flow‘. In practice, it may often be the case that the products are
actually there, but aren’t located in the right place in the warehouse.

5. Maintaining the correct pricing methodology

Nothing shines more light on financial accounting than the results of a


inventory count. The results are often a good basis for reviewing the
price strategy of goods that don’t generate the right profit contribution. In
this case, actions should be taken to remove this kind of product from stock.

6. Making theft transparent

An undesirable, common occurrence in retail and consumer goods is that


products are stolen. It may be that sensitive goods have already been stolen
during transport, as a result of which stock numbers are already incorrect
when the goods are received. It may also occur that personnel (often
temporarily hired staff) are, unfortunately, a cause of stock going missing.
In any case, carrying out a stock count makes it clear which category of
products is the most sensitive.

How accurate is the inventory count result?


We’ve covered the importance of a stock count. Of course, the theme is how
to carry out a stock take that gives the desired reliable information as the
end result. In practice, the tool most often used for stock takes is,
unfortunately, Microsoft Excel. The end result of this kind of stock take is
often not as reliable as it might appear. If you want to carry out a stock take
with the right level of reliability, then you should use the right software to
get the desired result. Consult your accountant to make sure you’re
following the correct procedures, and that your accountant or auditor are in
agreement.

It’s Your Turn


Are you carrying out a inventory count within your business and creating
added value via inventory management, or are you merely carrying out the
wishes of your accountant? If a inventory count is carried out, is it
meticulously planned ahead of time? Are external parties as well as internal
departments informed? Are systems cleaned up so that there are no more
open orders? Has the warehouse been physically prepared, marked, cleaned
and tidied up? Is everyone properly trained, and have the procedures been
explained? In other words, stock taking is a lot more than counting.

You might also like