Inventory management is a critical part of any business operation. An effective inventory management system helps ensure that a company has the right products to meet customer demand.
A well-run inventory audit can help to identify problems and areas for improvement in a company’s inventory management system.
Obtain an understanding of the client’s business and their inventory system
Proper preparation is essential when conducting an inventory audit. The first step is getting to know the client’s business and inventory process.
Inquiry and understanding of what processes they have in place will allow us to assess their internal controls and procedures more accurately.
We must evaluate their system, from ordering materials to shipping finished products, which will provide valuable insight into the records’ accuracy.
When this initial groundwork is complete, assessments can begin, and clients can be advised on the best ways to improve in areas identified through an audit.
Test the client’s inventory records for accuracy
Checking client inventory records for accuracy is critical in any business operation. When discrepancies arise, it can mean lost time, money, and labor spent to correct it.
That’s why we pay close attention to ensuring that both internal and external records are up-to-date and adequately reconciled.
We routinely audit the data, double-check calculations, and reconcile totals to provide our clients with a full, accurate report of their current stock levels.
Through this process, we help our clients confidently determine their asset values so they can make educated decisions on how best to proceed with their venture.
Physically count the inventory on hand
Once you have verified that all records accurately reflect the inventory on hand, it is essential to conduct a physical count. This necessary step ensures no discrepancies between the books and what exists in the warehouse or store.
A thorough physical count also increases overall efficiency by eliminating theft, spoilage, and human error.
Taking the time to count your inventory correctly will help foster a more successful business by ensuring that you always have an accurate idea of what stock remains on hand.
Compare the physical count with the recorded amount and reconcile any differences
After taking a physical inventory of your stock, it’s essential to compare the actual count with the recorded amount to find any discrepancies.
Generally, an audit trail and a spreadsheet will be helpful in this respect, as they will allow you to track the paper trail between your records and physical count.
Furthermore, if there are any differences, further investigation and record-keeping are necessary to explain each difference before completing the reconciliation process.
By ensuring that all of your physical inventory is accounted for through reconciling the two data sources, you can protect yourself from financial losses due to unaccounted-for products.
After completing these steps, you should understand the client’s inventory and whether it is appropriately managed.
After carefully considering the client’s inventory processes, it should be evident to you if they are adequately performing inventory management.
This includes evaluating the current supply chain and arrival times of parts needed for manufacturing processes.
You can also assess if their expected delivery dates meet customer deadlines and expectations and determine any areas with potential bottlenecks that need to be addressed.
After considering all these factors, you should completely understand how their inventory system works from start to finish.
In conclusion, auditing inventory is critical in ensuring a business appropriately manages its assets. By following the steps outlined in this blog post, you can ensure that you are getting an accurate picture of the client’s inventory.