Inventory Audit
Any business that manufactures or sells products should regularly conduct an inventory audit to ensure company records accurately reflect costs, sales, and physical inventory. Naturally, this task is more easily managed with inventory audit software functionalities, which automate a lot of the work.
What is an inventory audit?
An inventory management audit can be initiated by an accountant, warehouse manager or production worker who will use a process to validate the physical inventory count against financial records to make sure the counts and costs match.
But inventory sitting on shelves waiting to be sold isn’t necessarily all the inventory. Total inventory is also work in progress at different stages where raw materials are altered by manufacturing or assembling, and costs are added by labor and assets used to create those products. Inventory at every stage needs to be accounted for to show where money is tied up in the production process.
Using an inventory audit app is helpful for updating physical inventory in warehouse locations or by remote access outside the business location.
How to Audit Inventory
Some businesses choose to periodically update their inventory monthly or quarterly, which may entail a store closure or working after hours to take everything off the shelves. This is a tedious process that can take many hours to perform manually.
A perpetual inventory system updates inventory counts as each raw material makes its way from receiving through the production workflow; however, if there is breakage, spoilage or theft, discrepancies in physical inventory and the finance department’s records may not be obvious. Data entry errors are common, but less likely with the use of barcodes.
Auditing inventory needs to be easy enough to do so that your team doesn’t dread or avoid it. Having a software fully loaded with capabilities that is simple to use makes the job that much easier.
How SOS Inventory is the ideal inventory audit software:
- When barcodes are scanned upon delivery, products counts are updated throughout the system, so your production department sees the same quantities as your finance department.
- Inventory counts are updated for work in progress. Raw materials used in a build are removed from inventory and finished goods quantities are updated as the production process is completed.
- Easily reconcile data discrepancies from SOS Inventory to QuickBooks Online. Run a valuation report in SOS Inventory and compare to your total assets in QuickBooks Online. If these values do not match, run a work in progress report in SOS Inventory to reveal additional amounts to add to your total. The Reconcile Items Receipt report will indicate all purchases and receipts that have been reconciled to QuickBooks Online.
- Sales orders initiate purchase orders to vendors, production and inventory updates which are relayed to all users in all departments including sales, purchasing, production, fulfillment, and finance.
The goal of inventory audit software is provide greater insights into all areas of your business so you may act on what you learn and formulate a plan to make improvements.
Greater accuracy is possible when costs and quantities are consistently revised at every touchpoint. If a change is made, the reconciliation process with QuickBooks Online is a quick and easy step with bidirectional sync.
The ability to easily conduct an inventory audit at any time and maintain transparent records helps your business in many ways:
- Prevent shortages by having accurate inventory counts at all times.
- Keep accurate records for tax purposes.
- If your goal is growth, transparent and accurate finances are essential to attract investors.
- Be more informed when making important business decisions like product development, growth, and spending.
- Identify waste or causes of loss to streamline processes and save on labor costs.
SOS Inventory can make the inventory audit process seamless for you and your staff and catapult your business to greater profitability and productivity.
FAQs:
Q: Why is an inventory audit important?
A: It is important because it helps to ensure a company’s financial statements accurately reflects the value of its inventory, which is a significant asset for many businesses. Additional benefits include helping to identify potential inventory issues, such as theft, damage, or obsolescence, which undermine a company’s profitability. Ultimately, the goal is to optimize inventory management practices by identifying areas for improvement.
Q: How often should an inventory audit be conducted?
A: The frequency of such audits depends on the size of the company, the complexity of its inventory management practices, and the industry in which it operates. Some companies may need to conduct inventory audits on a daily or weekly basis, while others may only need to do so annually or biannually. At least once of year is the bare minimum to ensure that the inventory records are accurate, but keep in mind that the longer the time between audits, the more discrepancies you’re likely to experience.
Q: What are the steps involved in conducting an inventory audit?
A: The steps involved typically include planning the audit, counting the inventory, reconciling the counts with the inventory records, investigating any discrepancies or issues, and reporting the results of the audit. It’s important to have a clear plan in place before conducting the audit, including identifying the areas to be audited, establishing a timeline, and assigning responsibilities to staff members.
