How to Run an Inventory Audit
Inventory audits can be challenging, but they offer important insights for growing businesses. Whether you are running an inventory audit for tax purposes or to verify the units you have for your own records, it’s important to know what to look for in an inventory audit and how to resolve any issues so you can optimize processes, improve security measures and ensure all inventory is accounted for.
What Are the Benefits of an Inventory Audit?
When you’re running a business, your inventory is one of your most valuable assets. At the same time, inventory is especially vulnerable to manipulation. You’re constantly moving products in and out of your stock, so it’s essential to conduct an audit on a regular basis. Inventory audits also offer a clear picture of which items in your inventory are under-stocked and which ones are over-stocked. This information will help you stock appropriately in the future to maximize your profits.
What to Look for in an Inventory Audit
Inventory auditing procedures can vary, but there are a few common analyses and processes:
- Cutoff analysis: Pausing certain operations like shipping and receiving during an inventory audit can ensure that no materials slip through the cracks. A cutoff analysis is a good way to make sure all of your inventory is accounted for.
- Physical inventory count: This process is an important way to make sure your system’s inventory counts match up with the actual number of products in your inventory. Barcode scanning is a useful way to keep track of physical inventory.
- Analytical procedures: During this process, you’ll want to compare gross margins, the ratio of inventory turnover and unit costs of your inventory with data from previous years.
- ABC analysis: If you’re performing this type of analysis, you’ll need to group items together based on value or volume. High-value items are usually a point of interest for auditors, so it’s helpful to group them accordingly.
With these inventory auditing processes in mind, you can take the following steps before an audit:
- Identify inventory locations.
- Review your existing inventory management procedures.
- Take a tour of the warehouse and any other storage areas.
- Make arrangements to stop production during the audit.
- Forbid the movement of inventory from your facility.
How to Fix Any Issues After an Audit
Your inventory audit revealed a few issues. What are your next steps?
Inventory audits may reveal inefficiencies in your current process, like disorganization in the warehouse and retrieving methods that are slower than ideal. Once you recognize these issues, they are often relatively easy to fix. Audits can also reveal security issues that result in loss or theft. If this seems to be the case in your facility, you may consider implementing improved security measures or more frequent inventory checks.
Implementing an efficient inventory management process can simplify audits and help ensure that your stock is accounted for all year long. For many businesses, dedicated inventory management software offers an effective solution to streamline this process.
Run Your Audit With Finale Inventory
E-commerce businesses count on Finale Inventory’s lightning fast, scalable and highly adaptable inventory management software to track inventory with ease. Our software features powerful stock auditing capabilities, so you’ll never be in the dark when it comes to operations in your facility.
To learn more about our multichannel inventory management, contact us today or start a free trial to see the advantages of our software for yourself. Want to see Finale Inventory in action? Schedule a demo with our team.