Content

• Steps

The accuracy of inventory accounting affects various aspects of an enterprise's operations. The purchasing department relies on inventory data to initiate regular purchases of materials. Manufacturing and planning departments need accurate inventory data to plan the production process. Inaccurate inventory data can lead to shortages of certain materials, which will result in delays in the delivery of products to customers and could potentially lead to business disruption. Companies can improve the accuracy of their inventory databases by developing specific accounting procedures and monitoring employee compliance.

Steps

1. 1 Develop procedures for handling materials in the organization. They should include a detailed description of the steps that must be followed by workers when materials arrive at the enterprise and they are released into production.
   • The procedures should also describe the actions of employees in the event that they find damaged stocks, defects, and shortages.
2. 2 Train staff to work in accordance with procedures. The staff of the enterprise must thoroughly know all the procedures.
   • Each employee must understand the importance of accurate inventory control and its impact on the company as a whole.
   • For individual groups of personnel, separate training sessions can be organized, focusing specifically on their area of ​​work. For example, manufacturing personnel will have their own procedures for handling materials that are different from those in the purchasing department.
3. 3 Monitor staff performance and conduct audits. Inventory procedures are only valuable if they are followed by workers. Ensure that employees follow established procedures.
   • An audit of primary records and invoices can verify that employees are following inventory management procedures.
4. 4 Establish a cycle of intermediate inventory checks. Their frequency will depend on the turnover rate or the value of the respective groups of stocks.
   • To develop a schedule for inventories, stocks can be divided into groups with different frequency of recalculation. For example, a company might decide to inventory the availability of high-turnover parts every month, but inventory low-turnover parts twice a year.
   • The company must train employees to keep a continuous inventory of stocks. In this case, inventory accountants will be well acquainted with the list of inventory, the operations performed with them and actions in case of shortages.
   • Continuous inventory accounting also implies identifying the reasons for shortages when they are discovered. This can shed a ray of light on existing problems in inventory accounting procedures.
5. 5 Develop a procedure for dealing with shortages. In some organizations, the fact of writing off the shortages must be certified by the management. If a shortage is identified, the inventory accountant must bring the accounting data in line with the actual availability of inventories.
6. 6 Schedule total annual inventories. Annual inventories can be carried out 1-2 times a year to recount all stocks and bring accounting data in line with the actual state of affairs.
   • Discrepancies between the actual quantity of inventories and accounting data found during the inventory also make it possible to assess the effectiveness of the organization of inventory accounting and the accounting procedures themselves.