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What is a stock audit?
Simply put, a stock audit, sometimes referred to as an inventory audit, is the process of ensuring that the actual goods present in your store’s warehouse correspond to the information found in the stock register.
Inventory audits may be carried out internally or by external auditors who can guarantee maximum openness in the outcomes. Unless the audit is required as part of a regulatory or licencing process, you are totally free to choose between hiring a professional and conducting a stock inventory on your own. The specifics of the procedure in this situation will be determined by the laws of the nation in where your business and/or its warehouse are registered.
Why stock audit is crucial?
Every company that depends on tangible items ought to be comfortable conducting inventory audits. However, given that their products may be dispersed globally across numerous warehouses and shipping facilities, eCommerce companies place a premium on stock reviews. Here, a stock audit is the only method to effectively track and manage every product.
Importance of Stock Audit
There is no one right way to conduct an audit, and the specifics will vary depending on the operation. Nevertheless, most audits follow the same stages and activities:
You can discover or stop fraud and/or theft with the use of inventory management. These regrettable circumstances may be to blame if your stock audit reveals any differences between the reported goods and their physical equivalents.
Some of the main advantages of stock audits:
1. Your profit estimate is directly impacted by inventory audits. It’s the same as if you had lost or misplaced money or some of your possessions went missing. Because of this, timely inventory investment is required for accounting and profit & loss statements.
2. Stock audits might assist you in enhancing your company’s financial stability. You can learn more about the components of your inventory that sell badly or underperform in any other way by undertaking a thorough investigation of the present state of your physical items and the frequency of their purchases.
3. As you can see, stock auditing may end up being one of the most crucial processes carried out by a company because it provides insight into the company’s current financial situation. More importantly, a thorough stock audit can assist you in resolving current problems and averting new ones.
Stock auditing procedures
1. Estimate the need and stock up
Running out of stock would be the worst thing that could happen to you during the inventory audit. After all, you don’t want to halt all of your operations while you carry out the audit. This isn’t always possible, and some smaller businesses may be able to shut down for a day, but doing so can be perilous. Because of this, it’s crucial to thoroughly examine the data you now have in order to forecast future demand before auditing.
2. Count the tangible items.
Here, several strategies and approaches are used. You could, for instance, go through your warehouse’s shelves item by item and write down everything you find there.
3. Check your findings again
Although doing everything twice can seem excessive, in-stock auditing requires double-checking. Here, the possibility of human error is there, and the size of the task is frequently too great to entrust to a single source. It is crucial to double-check your findings because of this.
4. Compared to the financial records, compare your findings.
It’s time to compare your findings with the sales records after you’ve counted all of your tangible goods. Any differences or inconsistencies signify the start of the distinct work of locating the problem’s cause.
Checklist for stock audits
Here is a list of quick questions you should ask yourself before, during, and after performing each stock audit, to make things even simpler for you:
Has the audit of your physical products been verified twice?
Have any supply shortages been found? If so, what can be the cause?
Have any things outlived their usefulness since the last inventory check?
Has it become too expensive to maintain the stock?
Are all applicable laws and ordinances adequately documented?
Are the inventory sources and financial data consistently updated?
Is the procedure for recording all entering and leaving materials sufficient?
Exist any surplus items here?
Do the records accurately reflect them?
Can any manual auditing procedures be made to run automatically?
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Disclaimer: The above article is only for information purpose and is on based on the author’s interpretation of the relevant provision. The same should not be considered as professional advice.
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