When all your stock items move through an inventory system, it doesn’t matter what the characteristics of a SKU are because the shelf count of the item (actual balance on-hand stock levels) and record count (how many your records say are supposed to be there) will match.
The traditional method of determining if actual balance on-hand stock levels match book/record levels is to take an annual physical inventory. As a method of correcting inventory accuracy problems, this costly and time consuming effort is riddled with deficiencies. Consider these factors as to why:
- Accuracy is often defined in dollars rather than in actual physical units. This is an unreliable method to use since value changes are not affected when you have a resulting surplus of one this and a deficit of something else.
- Discrepancies that are “adjusted to zero sum” Often, the greatest problem with using the annual inventory as a method for establishing accuracy is that it provides no method for backtracking through physical and paper transactions to determine why an item’s record count and its shelf count do not agree. This is because a twelve month time period is simply too long of an audit trail. If the reason for a discrepancy cannot be immediately found during the inventory, an adjustment is made with the underlying cause of the error never being corrected.
- Faulty identification of units of measure. Incorrect quantities are often written down during annual inventories because stock counters simply do not understand an SKU’s descriptions, abbreviations or pack size.
- Imprecise ID of item. Misidentification occurs because inexperienced counters assisting with the effort do not recognize items, or misunderstand package descriptions, etc.
At the end of an annual inventory and all of the adjustments have been made, you have an inventory shelf and record count that agree. However, the next day the same system that permitted the previous discrepancies now begins to permit a new group of errors.
Reviewing the nature of inventory problems is a key step in solving them. A good systematic process provides you with a good starting point in resolving your own inventory-related issues. FreshVu2Go is a cloud-based SaaS application, which provides a robust and thorough system for both your company’s inventory and accounting needs.
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