Inventory Management Auditing

Inventory Stock Auditing header image

Inventory Stock Auditing

Inventory audits can be overwhelming, though they're a significant aspect of properly managing your business's inventory. Learn more about how to audit inventory, what the best procedures are and how you can be most prepared for an audit. Finale has extensive stock auditing capabilities by providing stock logs for giving business owners or warehouse managers and giving complete visibility into every stock operation.

Business owners can quickly audit and understand any stock discrepancies with the stock logs.  Without Finale, it can be arduous to understand WHO DID WHAT when many users are performing various stock operations (such as purchase order shipments and stock transfers).

Within Finale, every stock operation is tracked by user and timestamp, which allows you to easily investigate any order or warehouse worker issues. The stock logs provide tools for business owners to easily investigate issues if they suspect theft of company property or other malicious activity.  Finale makes it easy to get you the data you need to take the appropriate action.

The stock logs allow users to perform more granular searches by users to filter by product id and lot / serial number.

What Is Inventory Audit?

An inventory audit consists of cross-checking your financial records with your inventory records to ensure they match. Some businesses conduct audits internally, while others may have a third party's help. Inventory audits are a crucial step in inventory management because they ensure the physical stock count is accurate and enable you to check your inventory's condition and quality. Audits can also uncover any discrepancies in your records so you can make adjustments and get back on track.

Inventory audits are required at least once a year if your business's goods are considered material. Among other things, auditing helps prevent mistakes or fraudulent behavior and ensures businesses comply with accounting standards.

Inventory Audit Process

At the most basic level, employees need to go through each item you have in stock and add up the totals of the products you have on hand. Because each business is different, your company could use numerous inventory audit procedures when conducting an audit. Ultimately, you'll want to employ a procedure that makes the most sense for your business. Though far from extensive, consider how you could apply this list of common procedures to your audits.

Physical Inventory Counts

Physically counting your inventory is the most basic and common auditing process. Physical counts are done so you know what products you have on-site. While most of this procedure is completed manually, it's most efficient to use a barcode scanner to electronically record data as you count.

Cycle Counts

Cycle counting is similar to physical counting, though this procedure involves manually counting certain products regularly. Most often, businesses conduct cycle counts on their more valuable inventory so they have more consistent and up-to-date inventory counts of those products.

businesses conduct cycle counts on their more valuable inventory

Cutoff Analysis

Cutoff analysis procedures involve stopping your operations to do the audit so there is no chance of products going unaccounted for. If goods are shipped, received or sold in the meantime, your data can be thrown off. Pausing operations during your inventory count ensures the count won't be thrown off by outside variables.

How to Plan for Inventory Audit

Planning for an inventory audit ensures the process goes smoothly and everything is accounted for. Without preparation, the audit will be more time-consuming and can even be more costly. Here are a few things you can do to prepare for an inventory audit at your business.

Consider Timing

Because it's best to pause operations while you conduct your inventory counts, you'll want to conduct your audit when it will be least disruptive to your business. For example, many companies conduct inventory audits at the end of the year, though this could pose issues around the holidays, which tends to be a busy time for most businesses as demands are higher. Try to find a time when demand is slow so operations can briefly stop without being detrimental to business.

Keep Your Inventory Organized

While an organized warehouse is beneficial for numerous reasons, ensuring your inventory is organized prior to your audit is crucial. When your product is spread out randomly across your facility, counts will take much longer, especially if you're only counting specific goods, since you'll have to locate everything. An organized, clean warehouse will make it easier to count your inventory and can help make an audit go smoothly.

Also, consider how a messy warehouse might look to an auditor. Just as you'll be more confident that you haven't missed anything when your warehouse is clean, an auditor will feel more confident that the inventory was counted accurately. An organized warehouse shows you have a system and know how to keep track of your products.

Train Your Employees

You'll need to assign the task of completing inventory counts to specific employees. To ensure there are minimal errors or fraud risks, it's best to assign this task to attentive and detail-oriented employees who can take care of the task within the duration of their shift. Spreading the count over multiple shifts or switching workers halfway through increases the chances of errors.

Be sure the employees responsible for counting inventory understand the procedures you've chosen and are trained on what to do. You'll also want to select knowledgeable individuals to assist with the audit observations. Experienced employees can help the process go smoothly and assist auditors in finding what they're looking for.

Implement and Use Technology

Technology can simplify the auditing process in many ways. One way, like we mentioned earlier, is to use barcode scanners to record data while you do manual inventory counts. Another way to use technology to help with inventory processes is to implement an inventory management system. The right system will help you conduct inventory counts and compare records to minimize human error and make the process more efficient.

Importance of Stock Auditing

Stock audits are crucial to maximizing your operations' efficiency and ensuring your records are correct. Tracking your inventory helps you plan for fluctuations in product demand, especially when ordering or manufacturing new products. Stock auditing can also help you when budgeting, as you'll have a more accurate idea of what your financial records should look like. Stock audits can also draw out any discrepancies in your records so you can resolve them.

Stock audits and inventory counts hold your business responsible for its investments and profits and how your inventory levels relate to both.

Trust Finale Inventory for Your Inventory Stock Auditing Needs

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Schedule a demo of Finale Inventory to find out how we can help with your inventory stock auditing processes.

(Videos: See the complete list of available videos)

Video Transcription

Hi, this is Ryan from Finale Inventory. And today we're making a video on how to audit your stock within Finale Inventory. So the very first thing we're going to do is navigate to our stock screen. I've created this product today and this will be our demonstration. So essentially, we don't have any quantity on hand I am showing on order units because I created a quick purchase order before this actual video took place. Now, when I open the gear icon, what you're going to notice is I am signed in as user, Alex. So we're going to, be doing the first few transactions with user Alex and then we will transfer to another user to show you generally what a stock audit looks like.

Now when we go to purchasing and purchase orders, this is the purchase order that I already have pre-created here. So we have our red wagon with a quantity of 10. So now what I'm going to do is go over to our shipment here. And I'm just going to, use this link. And that's going to, update our order to match our shipment. So I'm going to, go ahead and receive this. And this will bring 10 units into our warehouse. So I'm going to, go back to the purchase order and complete that. So at this point, if I were to go to my view stock page, what I would see is that I have 10 QOH of this specific product.

Now that was the first transaction that we've done with Alex, I'm also going to do another transaction, which is going to be a quick transfer, this would be fine with any batch transfer. But a quick transfer will demonstrate this for us, So I'm going to, search for that same red wagon, I can see that I have 10 in A1, I want to transfer four of these items, and I want to transfer them to A2. I can also enter a note, you know, for example, did not fit in A1. So that's just an example of a quick note you can add in there. So once I commit that transfer, we will see that in our stock screen. So if I were to open up my details here, I can see that I have two different sub-locations, A1 and A2, with six in A1 and four in A2.

Now at this point, what I'm going to do in this video is I am going to sign out and I'm going to jump into this account with another user. So I'll log out. And I'm just going to, go right back into this account. And login. So now I just want to, note that I am under a user Ryan at this point. So now at this point, we've already done a purchase, we've brought our inventory in, we have done a transfer within our own warehouse to another location. And now I'm just going to quickly create a sale for us to send out the door. So I'm going to create the sales order, we can select their customer, I'm going to ignore a lot of these other details because we are showing the stock audit. And what we can do is just type in our red wagon. And maybe we just sold two of them. So at that point, I can mark this committed. And I'm going to jump right into our shipments tab. And I'm going to say that we ship these out. So I specifically want to ship these out of A2, So I can deplete this sub-location. So once I've done that, I'll ship it out.

I'm going to skip the invoice in this video as we are looking at stock audits. So I'm going to, mark that sale completed. And now this is typically where you may want to go take a look at you know what is going on with your stock. So when you come back to your stock page here, and we filter down to that red wagon again, what we'll notice is that we have eight quantity on hand here and we can see our details. Now for whatever reason, maybe you thought you had more or maybe you thought you had less. You know, these are some of a few reasons why companies would look at the history of a stock. So let's go over to stock history and see what happens with this red wagon.

So we can use different filters here to see different record dates, these other filters to get a little bit more granular with our search here, I know exactly what we're looking for we're looking for that red wagon. So once I find that now what I will see is all of the transactions that have occurred with this particular item, so number one, I can see the date of when this actually happened. If we hover over here we'll be able to see our transaction user which is Alex for our purchase as well as our quick stock transfer. So you'll see the transaction description here of what actually happened. And in addition to that, I can see also that Ryan has shipped this sale out as well on the same date. So what we can also see here is our running totals so if you look at this our initial balance was zero and then we brought in a purchase order which is 10 so our resulting stock was 10. We made a transfer of four which resulted in six and then we received that transfer in a different sub-location so we ultimately have the same running total here and then lastly, we made a sale which reduced the stock level by two. So our resulting stock quantity was eight. Now in addition to that, you will be able to see some of the transaction details as well over in this section here and you can always customize this screen as well to add more information of what is pertinent to you and your business. So I hope this video was helpful. Stock auditing is a process that many businesses need to do on a daily basis and Finale will be able to help you with that using our stock history screen. Thanks for watching.

Using Finale Inventory software has been a very positive experience.

”We have keyed in 30 Field Reps' shipping information into the Finale system, along with 25 descriptive SKUs and inventory counts. It's simple to create Sales Orders for them and Sales History is automatically generated for easy review and analysis. We wand all inventory used each day and have a current count at all times.”

5/5 Stars

Stu S.
Ashfield Healthcare
Aug 17, 2018

Really good and fun to use inventory management system

”Intuitive UI, slightly different but better than many legacy applications
Easy to configure UI, reports, forms and custom fields
Reports and forms are very easy to use and output in different ways
Data load from Excel via cut & paste is very intuitive and just cool
We use it to track mainly individually barcoded items, works really well
Customer service is outstanding”

5/5 Stars

Walter Z
Fitness Brokers USA
June 28, 2018

Always excellent customer service

”Always excellent customer service, and very easy to use . We got help with any issues and all the training we needed too.”

5/5 Stars

Christine J
Vexacor Supply
April 11, 2018