Inventory Verification- Procedure, Challenges And Solutions

By Author: PRF Management Consultancy
Total Articles: 9
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Inventory verification is the process of verifying the accuracy of a company's inventory records, which are used to track the quantity, value, and location of the goods and materials that a business has on hand.

This process is important because it helps businesses ensure that their inventory records are accurate and up-to-date, which is essential for accurate financial reporting and effective inventory management.

Any type of verification requires a lot of time and manual work, but it offers a thorough analysis of a company’s various accounts and their financial status.

Let us start understanding the procedure of Physical Inventory Verification.

Procedure

Here are the key steps involved in inventory verification :

Identify the inventory to be verified

The first step in inventory verification is to identify the inventory that needs to be verified. This typically includes all goods and materials that are held in stock, such as raw materials, finished goods, and spare parts.

Conduct a physical count of the inventory.

The next step is to conduct a physical ...
... count of the inventory to verify its quantity and value. This typically involves physically counting each item of inventory and recording its details, such as its description, quantity, and value.

Verify the accuracy of the inventory records.

Once the physical count is complete, the next step is to verify the accuracy of the inventory records. This involves comparing the physical count with the inventory records to ensure that they are accurate and up-to-date.

Make any necessary adjustments to the inventory records.

If any discrepancies are found during the verification process, the next step is to make any necessary adjustments to the inventory records. This may involve updating the quantity, value, or location of the inventory to reflect the results of the physical count.

Prepare a report.

Once the verification process is complete, the next step is to prepare a report that summarises the results of the verification. This report should include any discrepancies that were found and the actions taken to correct them.

Overall, inventory verification is an important process that helps businesses ensure the accuracy and integrity of their inventory records. By conducting regular inventory verifications, businesses can improve their financial reporting and inventory management, and ensure that their inventory is properly accounted for.

Challenges

Long and Time-consuming

The verification of physical inventory is a very long procedure. Because a company has several assets, the fixed asset verification procedure is typically drawn out and stressful. In addition, because some of the assets are in different places, validating each one of them might be a challenging procedure. Additionally, each paper is examined and corrected.

Difficult to scale

As your company expands, you'll need to be more strategic about your inventory solutions.In between complete physical inventory verifications, spot checking may be a more practical approach to keep inventory audits under control. This entails selecting a particular product, calculating the quantity on hand, and contrasting it with the quantity recorded in the system.

By requiring a spot check when the system declares the product stock as zero to assure there are no more units on hand, inventory management technology may contribute to the simplification of inventory processes.

Can halt operations

Operations, such as filling orders and shipping goods to clients, are halted if everything is put on hold to conduct an inventory verification. In the era of Amazon, satisfying consumer demands for prompt delivery might affect how they interact with your offering and form an opinion of your company.

Solutions

Demand Forecasting

Understanding current counts is aided by inventory verification, but using data to guide future business choices is a very different matter. By analysing previous data, demand forecasting makes predictions about upcoming orders. This helps a corporation satisfy consumer expectations while making smarter decisions about inventory planning, product storage, and marketing campaigns.

Stock control System

To handle problematic inventory, such as perishable goods, delicate machinery, or outdated supplies, implement stock control systems. If the manufacturer specifies it, do routine preventative maintenance on the machinery and equipment stock that is kept in storage. To track shelf life and reduce waste, catalogue data on issue stock location, cost, and amount is available.

Preventive Control

You may examine the state of your inventory and choose whether to pro-actively refill inventory using software like PRF's. PRF Management Consultancy can project when you should send extra merchandise to prevent stockouts using the order history for your shop; there is no need to perform manual reorder point calculations again.

Conclusion

Overall, inventory verification is an important process that helps businesses ensure the accuracy and integrity of their inventory records. By conducting regular inventory verifications, businesses can improve their financial reporting and inventory management, and ensure that their inventory is properly accounted for.

We at PRF will provide business IT-enabled tools for effective and accurate inventory management, assisting organisations in performing efficient and frequent inventory audits, and controlling the inventory cycle end to end.

We cater to a wide range of management consultancy services in Dubai, providing clients benefit of multi-disciplinary expertise under one single roof.

Source : https://www.prfmanagement.com/blog/Inventoryverification.php