How to Prepare for an Inventory
Being able to confirm the actual stock on-hand in your business is very important. It enables you to identify variances and quickly identify issues with inventory management and control.
Knowledge of your inventory movements enables you to make informed decisions about damaged inventory, theft, slow-moving items, and current warehouse processes.
It is very important to be prepared for your inventory. Here are some rules to follow to ensure the inventory count runs smoothly:
1. Establish which inventory is owned by the business and the location of the inventory
Identify inventory that has already been invoiced to a customer, but has not yet been received by the customer and is still in the warehouse/store. In addition inventory received within the warehouse/store but not yet recorded anywhere should also be identified.
Ensure inventory held at different locations or on consignment basis is all accounted for.
2. The stock room needs to be clean and tidy and stock items should be clearly laid out
You should attach labels to shelves to clearly identify different types of inventory and location; eg this will show where the inventory is located as well as the type of inventory.
If relevant, give your inventory counters clear guidance on the direction they should count; eg start from a specific location and end in a specific location.
3. Tools required for the inventory
- Inventory sheets –this shows on a count the inventory numbers against each inventory item.
- Write-off sheets – always check the condition of the inventory as you count, make a note if it is damaged.
- Manual count – this is when each item is counted and logged in writing rather than being scanned, normally because there are no barcodes.
- Calculator – to add total numbers and check variances.
- Hand held scanners – this is for barcoded stock only.
4. Do not allow radios, mobile phones, iPods and idle chatting
While it might seem mean, distractions will easily lead to errors.
5. Every item of your inventory needs to be counted. Never ever estimate!
It might seem really tedious, especially if you think you have a good idea of your inventory quantities, but it is so much better to get a 100 percent accurate record the first time. Do not forget to physically open boxes – just because the label on the box says there are 75 items in the box that does not mean there actually are.
6. Check the physical inventory count number against current accounting records. Always recheck discrepancies
Always make a note of all variances and follow up where necessary to identify the reasons for the variances.
7. Update your records
When the inventory count has been finished, update the inventory records in your accounting records.
A well planned inventory will result in minimal disruption, accurate inventory records and provides a basis for making better informed business decisions.