Every business, regardless of how large or small, should engage in annual audits so that they can take a full inventory of their goods.
Some companies have massive amounts of inventory and it can be very time-consuming to audit it.
Even smaller companies can feel slightly overwhelmed because while the quantity of stock they are handling is smaller there are still challenges in terms of manual resources.
So what’s the easiest way for you to take an audit while also managing the day to day operation of the store?
Let’s take a look now at the audit process for some answers.
Why Are Audits Important?
You should perform an audit if you record inventory as an asset so that you can confirm that your accounts are correct and that your balance of assets to liabilities is what you think it is.
Audits can help you to identify waste and alert you to theft or other issues with your inventory.
Knowing which inventory items tend to have the most errors and issues can help you to improve your day to day processes.
Steps to Follow When Completing a Stock Audit
Taking an inventory as a part of an audit can be a time-consuming task, and the process may differ slightly depending on whether you are auditing a retail store or a warehouse.
For a busy warehouse, the best time to do an audit might be overnight, or other times that are out of hours, so that the day to day workings of the warehouse doesn’t interfere with the stock taking.
In addition to counting the stock in the warehouse, it can be useful to spend some time observing the operations of the warehouse.
This will help you to ensure that you get an accurate idea of what goes on in the business and where improvements can be made.
The steps that you should follow for a stock audit should look something like this:
- Start planning the audit well in advance. Try to do it during a time that will not be busy, for minimum disruption
- Inspect your internal records and documentation to make sure that deliveries are signed off properly, etc.
- Carry out a full inventory check. Use barcodes for this if possible, or an inventory card or sheet system if you are unable to use barcodes
- Use a blind double check for inventory. Have two staff members independently check each category or department and reconcile the numbers afterwards
- Very large companies may also ask for external audits by a third party
- Where errors are found, the physical inventory must be reconfirmed, and then the mathematical accuracy of any related documents or records should also be checked
- Log the results of the audit, including any corrections that are required
It is important to review the results of each audit and compare them to past audits.
After the audit has been completed there are a number of analytical options for confirming shipping costs, costs of goods, overheads, and other issues.
One thing that can often surface when regular audits are performed is patterns relating to the loss of goods, waste, or theft.
It could be that certain items are fragile or have a short shelf life and that it is too wasteful to stock them.
It could also be that a senior staff member has been stealing items for a long time, or that items placed in a certain ‘blind spot’ in the store are often stolen.
This may indicate that changing shift patterns or store layouts as a great opportunity to reduce theft.
These are things that you will only learn if you pay attention to the ongoing results of your audits.
Careful auditing will give you peace of mind that your business is in a good financial position.
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