For every organization, inventory management is considered as an essential part of business process. The primary reason for its importance is that inventory has a direct relation to working capital and productivity. In case, stock available in the warehouse is not sufficient, the manufacturing process may suffer. For a company, both the situations are alarming whether there is a lack of inventory or the presence of excess stock in warehouse.
Therefore, it is crucial for every company to have proper inventory control system.
Inventory management techniques comprise of various tools and methods to effectively handle the warehouse of the company.
Inventory reconciliation is considered as an essential element of inventory management techniques. Also, it is the most effective tool for detecting any fraudulent activity related to inventory management of the company.
What is inventory reconciliation?
Inventory reconciliation is a procedure to analyze and verify the accuracy of inventory records by comparing it with actual stock available in the warehouse. It is an ultimate inventory tracking system that helps to ascertain the amount of raw material and stock available in the storehouse of the company. Inventory Reconciliation is one of the service offered under finance and accounting outsourcing.
How to manage inventory successfully?
It is essential for a manufacturing company to keep track of its inventory to carry out the process of production smoothly. Therefore, a company should handle inventory efficiently by using following steps:
1. Review the actual stock present in the warehouse by physically counting it again.
2. If there is a computerized system available for counting the inventory, then you can use it to save the time. It is vital that the system you are using is reliable. In case, you have any doubt related to the computerized system; it is better to do the manual counting.
3. Compare this data with the latest inventory records of the storehouse.
4. Check whether the availability of stock conforms to pre-decided standards of the minimum stock level.
5. Verify the records on the basis of inventory valuation method followed by your organization that is, LIFO, FIFO or any other procedure.
6. In case of any disagreement between the latest data and records, examine the relevant receipts and documents to identify the source of error.
7. Investigate to find out whether any record or paperwork is missing or not.
8. Finally, record your observation by doing proper documentation.
Inventory reconciliation is an essential but time-consuming business activity that requires knowledge, skill, and professionalism. Therefore, today companies prefer to outsource inventory reconciliation for saving time and availing the services of experts at a reasonable cost.
Learn more about Reconciliation Services at Aristotle Consultancy.