What is an inventory and why is it needed
Inventory is a reconciliation of the accounting and actual quantities of an organisation’s inventory. In simple terms, it is a control point that allows you to confirm the availability of the company’s assets. A retail store is a kind of enterprise that operates in the B2C format with many business processes and requires control.
What are the types of inventory?
Depending on the needs and objectives, a business chooses one or more types of inventory:
- Full;
- Selective (partial);
- Cyclic.
Complete inventory
The ideal time to conduct a full inventory is when the store is closed, for example, in the morning or at night. But in the morning, before opening, you can only count a store with a small inventory. Stores with a large stock balance will have to be counted at night. But even taking an inventory at night, when it seems that everything will be easy without unnecessary fuss and the absence of customers, is a mistake.
This process entails considerable costs, both financial and organisational. At the very least, it involves the organisation of employees who need a day off before and after night work, equipment, administration to collate the results, etc. Also, do not forget that working at night leads to more errors than during the day.
Conducting an inventory during the day is also not an easy process, as cash transactions in the store take place during the inventory. That is, sales (write-offs) and returns of goods (postings). These transactions directly affect the increase in the number of items that need to be double-checked when reconciling the data.
Under what circumstances is a full inventory carried out?
There are a number of factors that go into an inventory. The main ones are listed below:
- Regular inventory to control and assess the actual availability of inventory (depending on the company’s internal policies and capabilities);
- Inventory for financial reporting;
- nventory for changes in materially responsible persons;
- Inventory when moving/closing a store.
What is cyclic inventory?
One of the most innovative and painless inventory tools. It involves taking an inventory of all inventory items within a predetermined period of time by recalculating a certain part of the inventory online on a daily basis.
This tool is already actively used for warehouse inventory. As a rule, a large number of goods are stored in a warehouse, and a complete shutdown of the warehouse for inventory is almost impossible, as it will take days to complete the inventory, and the absence of shipments is very painful for the business.
Cyclic inventory allows you to recalculate inventory in a store/warehouse without interrupting the company’s business processes. Of course, this process is very difficult to implement, as it requires a lot of improvements, rules and algorithms to be made to the accounting software.
Why you need a sample inventory
A spot check is needed to reconcile the accounting and actual quantity of goods for a certain number of items, batches, categories, etc. In simple terms, it is a spot check. There are many methodologies for building “samples” (a list of items to be recalculated), depending on the purpose. Most often, a spot check is carried out when problems arise with any item or batch of goods.
What is a store audit?
An audit of a retail store is aimed at preventing losses from both external and internal factors. With a regular and high-quality audit, a business protects its assets from all kinds of risks.
During the audit, the audit checklist must include items aimed at external factors of theft. The operability of anti-theft gates, the presence of clips on the goods, security, etc. However, as practice and statistics show, more than 80% of theft and fraud is committed by staff.
In order to prevent and detect internal fraud, an audit is mainly carried out, which is also accompanied by a sample inventory of goods according to a certain methodology.
There are four main areas of theft:
- Fraud with discounts;
- СWrite-off of defects (lack of procedures and control);
- Income/expense documents (lack of control);
- Sales are not through the cash register.
Each of these areas requires regular and thorough checks. In the absence of checks, the risk of fraud and theft increases significantly.
The audit involves not only checking individual items, but also a large number of business processes in general, creating a number of necessary reports for control, and methodologies for spot checks.
Conclusion
To maximise the protection of business assets, it is necessary to regularly conduct a full inventory of the store (the frequency depends on the need and situation) and conduct an internal audit accompanied by a sample inventory of inventory.
