How to Check if you are Missing a lot of your inventory ( Internal Audit) Part 2

Step 1   Consolidate  first the actual numbers in your documents ex. Delivery receipts, Sales Invoice, Sales Return.


Step 2    Do a Monthly or weekly physical count.


Step 3    Take note of the difference.


Product count based on documents  >  Physical count
Possible scenario
1. You have the delivery receipts but the product is still in transit.
2.  There is a possibility that a staff stole an item.


Product count based on documents =  Physical count
Possible scenario
1. You have an accurate inventory.
2. Less likely but possible that count based on documents have the same error as the physical count.
3.  You made an error in physical count so the differences will not be reflected


Product count based on documents <  Physical count
Possible scenario
1. You are not issued delivery receipt on the received goods.
2. The good is still pending for delivery to customer.

Discuss the numbers with your operations people and record keeping department to interpret better the possible reason of the differences.

How long can your business survive in a monthly zero sale scenario? Part 1