Completing A Physical Inventory Checklist

The supply chain world braces for one of the most daunting tasks required to ensure a stable supply chain…physical inventories.  Cycle counts are completed periodically, but the end of the year typically calls for warehouse, stores, technicians, and other points in the supply chain to take stock and validate what is reported in your inventory system against what is physically on your shelves.

Physical inventories are necessary to support accurate financial reporting at the end of the year, and some of the additional benefits include:

Inventory Balance Alignment.

 Checking for discrepancies between inventory systems and physical balances. The goal is to minimize discrepancies and maintain accurate and up-to-date information about the availability of goods. This process typically involves regular stock counts, audits, and adjustments to correct any discrepancies between the physical inventory and the recorded quantities. Effective inventory balance alignment is crucial for optimizing supply chain management, preventing stock outs or overstock situations, and improving overall operational efficiency.

Theft Recognition.

Looking for items that may be stolen, missing, or broken that have not been identified throughout the year. Theft recognition typically involves the following.

1.     Monitoring Systems: Implementing surveillance systems, security cameras, and other monitoring tools to track the movement and status of assets.

2.     Audits and Inspections: Conducting regular audits and inspections of assets to compare physical counts with recorded quantities in the asset management system.

3.     Inventory Controls: Implementing robust inventory controls, such as access restrictions, secure storage, and tracking procedures, to prevent unauthorized access to assets.

4.     Alarm Systems: Utilizing alarm systems that can trigger alerts or notifications when unusual or suspicious activities related to asset movement or location are detected.

5.     Data Analytics: Employing data analytics tools to analyze patterns and anomalies in asset data, helping to identify potential discrepancies or irregularities that may indicate theft.

6.     Employee Training: Providing training to employees on security protocols and the importance of reporting any observed incidents or irregularities.

Financial Reporting.

Ensuring company financials are accurate for budgeting and reporting purposes. This includes assets such as physical property, equipment, financial investments, and other resources. The primary purpose of financial reporting in asset management is to provide stakeholders, including investors, management, and regulatory authorities, with accurate and transparent information about the financial position and performance of the organization's assets.

The following identifies some recommended steps to ensure a successful physical inventory.

PREPARATION

Choose a Date. Setting a date for your physical inventory is the first step.  This is easy to overlook as a priority, but choosing a date that does not interfere with large projects, end-of-year rushes and inventory shipments, holiday shopping hours and team vacation time is critical to a successful physical inventory.  You should also consider impacts to inventory and financial systems for software updates during the physical inventory. Equally significant is the foresight to anticipate potential impacts on inventory and financial systems. The consideration of software updates and system maintenance during the physical inventory becomes crucial to prevent unwarranted disruptions and ensure the seamless execution of the counting process. In essence, while choosing a date may seem straightforward, the gravity of this decision resonates deeply in orchestrating a disciplined, disruption-free, and ultimately successful physical inventory undertaking.

Communication. While this is second on the list; this is the most important consideration for preparing for a physical inventory.  Communication with your teams, including leadership, warehouse team, audit team, IT team, and any other group responsible, accountable, informed or consulted in the process.  Communication includes not only the sharing of the date, but also includes the establishment of reminders for each key milestone documented below. Establishing a line of communication for all involved is key for any upkeep purposes in the future. The essence of communication extends beyond merely sharing the selected date; it encompasses the establishment of a robust communication framework. This framework should encompass regular updates, progress reports, and reminders for each key milestone documented in the preparation process. Effective communication lays down the tracks for a collaborative and synchronized effort, ensuring that every team member is well-informed and aligned with the overarching objectives of the physical inventory.

Make A Map.Those familiar with the warehouse or store may not see the need for this, but documenting all the physical locations where assets and inventory are stored in a format that is easily accessible and easily understood is critical to ensuring everything is reconciled and no key areas are missed during the physical inventory. This will also help those who are not regular inventory team members who may be supporting the physical inventory with gathering all the data. Moreover, this structured documentation proves invaluable beyond the core inventory team, extending its utility to individuals who may not be regular members of the inventory team but play a crucial role in supporting the physical inventory process. It facilitates their seamless integration into the inventory procedures by providing a user-friendly reference for locating and understanding the various storage spaces within the facility. In essence, the documentation serves as a guiding map for the entire inventory endeavor, promoting accuracy, efficiency, and inclusivity in the overall asset management process