What is an Inventory Audit?
An inventory audit is the process of evaluating stock levels, finding and tracking discrepancies, and ensuring that all stock levels align with current records. It’s critical for organizations to conduct these audits regularly as it helps businesses spot errors, reduce losses, and minimize shrinkage.
Each organization conducts their inventory audits differently depending on their inventory management system. It’s important for your inventory audit to consider all the unique items in your inventory, as well as the qualities of your industry that may affect your auditing system.
Importance
Conducting regular and comprehensive inventory audits is critical for any organization. Regular inventory audits allow you to keep track of every item in your inventory easily so you can spot any potential issues, losses, or instances of misalignment with your current record. Tracking your inventory is also a great way to stay on top of your processes and ensure you keep proper tabs on your company’s materials and products.
These audits also allow you to effectively plan for the future. When you conduct audits, you gather comprehensive data on your operations and the items you have in stock. This means your decisions and strategies will be based on hard data, increasing your business’ chances of success.
Types of Inventory Audits
There are different approaches to inventory audits that offer unique benefits. It’s important that you choose the right approach for your organization to ensure that you effectively track your inventory. Here is a quick breakdown of the most popular types of inventory audits that you should keep in mind:
Cycle Counts
Cycle counts can be seen as dividing your inventory into different subsets. These subsets are then audited on a regular basis and at different times. This allows companies to conduct regular audits of all their items without disrupting daily operations.
Perpetual Audits
Perpetual audits consist of real-time data tracking of a company’s inventory. Typically, this is done using advanced software that constantly and consistently tracks items in your inventory. This way, you always have a reliable count of the items in your inventory.
Periodic Audits
As the name suggests, these audits are conducted on a regular and periodical basis, usually every few weeks or months. This involves a comprehensive audit of all inventory items and usually disrupts workflows for a few hours. However, it provides businesses with a comprehensive view of their inventory.
Best Practices for Conducting Inventory Audits
While companies should tweak their inventory audit strategy according to their needs, there are a few best practices to keep in mind. These include:
Conducting Proper Training
It’s essential that all team members understand the importance of inventory audits and how to conduct effective ones. This is why training your staff and workforce in inventory audits is crucial for comprehensive and accurate audits.
Documenting Processes
The key to a good audit is transparency, and to maintain transparency when conducting audits, it’s best to document the process. This includes generating comprehensive audit reports with photo or video attachments to create a reliable paper trail.
Reviewing and Improving Procedures
No auditing process is perfect. Industries, inventories, and processes change over time. Thus, it’s important for your team to adjust your auditing procedures based on how well they work. To do this, teams must conduct regular reviews of their auditing procedures.
Leveraging Technology
There are numerous tools available to help you conduct inventory audits. It’s important for businesses to leverage modern technology for their inventory audits to make the process easier, simpler, and more reliable.
