As the year-end approaches, it is time for businesses to conduct a physical inventory to have an accurate inventory record. A proper year-end physical checklist helps businesses to enjoy many benefits, such as improved tracking processes, cost savings, and future efficiency.
It is a necessary component for a valid balance sheet and income statement & also improves operational efficiency, but how do we know? What is the best way to conduct physical inventory at year-end?
Worry not! In this article, you will get a stepwise guide on the best way to conduct physical inventory at year-end?
Steps to conduct physical inventory at year-end
Step 1) Planning for the year-end physical inventory:
Create a plan. A plan is essential in step in conducting physical inventory at year-end. Begin by gathering information by figuring out if the company controls the physical checklist with an endless or periodic inventory system. Decide on how frequently you will calculate it.
Step 2) Order Count Tags:
It is necessary to order count tags. Order a good number of two-part count tags for the expected inventory count, and also number these tags. It is to individually track the inventory as a part of the counting process while conducting the year-end physical inventory.
Step 3) Preview the Inventory
Inspecting the year-end physical inventory in advance of the planned stock count helps identify if any items appear to be in a condition that would be difficult to calculate or if there are missing part numbers. If any such case happens, you can notify the warehouse staff to make the required modifications.
Step 4) Order the Necessary Equipment:
Before conducting the year-end physical inventory, order the required equipment in advance.No matter if it is clipboards and pencils, count tags, or scanners.
Step 5) Pre-Count Inventory:
Examine the inventory several days before conducting the year-end physical inventory. Count any items that can be sealed in the containers and mark the quantity on the sealed tapes. It will make your job much easier during the actual count. Also, if there is a broken seal of a container, the staff will know that they must re-count the contents of that container.
Step 6) Create a Space to conduct year-end physical inventory:
Specify any additional areas required for counting or staff. The place specified for year-end physical checklist must be free from clutter or trash.
Step 7) Complete the Data Entry
Complete any remaining data entry transactions before the year-end physical inventory count begins. This data entry will be transactions for issuances from the warehouse, transfers between bin locations within the warehouse, and returns to the warehouse.
Step 8) Stop other warehouse activities.
Intercept warehouse deliveries and segregate all newly-received stock that is not essential for counting to avoid the inventory records in a state of instability. And it will not be entirely reliable.
Step 9) Enter Tag Information
Ensure to include all issued tags in the file. Enter information written on count tags into an online data form. Once this completes,
print a report displaying all entered tag numbers. Look for any gaps in the numbers once sorted by tag number. Examine if you find any gaps. It ensures including all issued tags in the file.
Step 10) Examine Unusual Results.
If there is any unusual information, re-sort the year-end physical inventory report as many ways as possible and analyze the tag entry associated with each one.