Inventory best practices

By Rhonda Robinson

Theft from a business is a very real issue, whether it’s something as seemingly small as taking office supplies home for personal use or something larger like stealing hard cash or inventory products.

All inventory, whether it is products held in a warehouse or supplies stored on a shelf in the store, is equivalent to cash just as much as the cash in your register.

Here are some basic guidelines for removing opportunities for theft to occur:

• First and foremost, a full physical inventory must be conducted, in order to get an accurate baseline established for moving forward; not only for your operational records, but it is also a necessary number needed for completing an accurate income tax return.
• Make certain your bookkeeper understands the general accounting principles associated with inventory adjustments and makes the correct entries (i.e., only the differences/variances between the baseline total and the updated physical inventory totals are recorded).
• If you are a business owner who enjoys the economies-of-scale associated with having a “centralized warehouse” that serves multiple locations, a full monthly physical inventory is strongly recommended. This type of operation introduces greater risk of having things fall thru the cracks; especially in larger operations!
• Cycle counting (preferably random physical spot inventories with little or no notice) by specific product category need to be completed on a monthly basis so folks know that in any given month and at any given time a full physical inventory will be conducted in a specific product category.
• It is also prudent to consider doing an inventory on the same product two or even three months in a row in order to prevent folks from getting complacent and feeling comfortable with the notion.s
• Everything coming into the warehouse or store needs to be inspected (looking for accuracy in products delivered against the purchase order and bill of lading, as well as damaged products) and then immediately logged into whatever inventory tracking system you use as either received and in stock or short or rejected due to damage.
• Everything going out of the warehouse needs to have a paper trail as well —commonly known as a picking ticket —and every picking ticket needs to have at least two signatures, one of which must be an employee of the company.
• And, with all the technological capabilities available today such as smart phones, iPads, and more, you need a list of fixed assets and some sort of check-in /check-out system for keeping track of mobile devices provided by the company for employees to use in serving customers. These items can also mysteriously disappear without having specific controls applied as to how, when and by whom they can be accessed and used.

Each one of the segments is a drawer in your cash register that therefore needs to be handled as if it were cold, hard cash in your hand — because, it is!

It is the duty of every business owner and the responsibility of every manager to ensure opportunities for theft are removed, by seeing to it safeguards are put into place using a checks-and-balances system that is written into the company’s policies and procedures.

~Cheers!


Rhonda Robinson​