What is inventory ? What methods are there to help businesses count inventory effectively? In the article below, let's learn about inventory counting and detailed inventory process with 1C Vietnam.

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1. What is inventory?

Inventory counting is the activity of counting the number of items in the warehouse and comparing that quantity to the quantity in the inventory management system. The inventory counting process includes checking, comparing, and adjusting differences between the actual quantity of goods in the warehouse and the data in the books. Inventory needs to be performed in all types of organizations from small retail stores to large enterprises.

2. What is the purpose of inventory counting?

Inventory counts play an important role for businesses. The purposes of this process include: .

• Managing or monitoring the amount of goods: This activity allows businesses to accurately check the amount of inventory, thereby detecting discrepancies (if any) in reports on the management system and actual items. are in stock.
• Create an accurate budget: An accurate inventory count will help in better budget planning for the following year's inventory orders.
• Accurate profit reporting: Inaccurate inventory means the company will report incorrect amounts for cost of goods sold, gross profit, and net profit. Therefore, inventorying is aimed at calculating actual numbers to provide accurate profit reports.
• Prepare the balance sheet for tax season: Inventory counting is a necessary activity to support balance sheet preparation during the tax declaration process.

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3. Inventory counting methods

Inventory counting can be done using two methods including regular inventory and periodic inventory. Let's learn more about each method in detail below:

3.1 Check inventory regularly

Regular inventory counting is the practice of performing daily or weekly inventory depending on the type of item and quantity of goods. This method is often applied to manufacturing enterprises that sell high-value products and few items such as enterprises manufacturing equipment, machinery, construction,...

The advantage of regular inventory is that it helps businesses minimize the risk of errors and losses that may occur. However, this method still has limitations: it is costly in terms of wages for human resources to inspect goods and the accounting department has to spend more time handling a large amount of work.

3.2 Check inventory periodically

Periodic inventory checks can be performed monthly, quarterly or according to each business's own cycle. This method is currently widely applied in the market, especially for businesses with a large number of products, diverse product codes and different average product values.

Periodic inventory counts help businesses save time and reduce pressure on accountants compared to regular inventory counts. However, a disadvantage of this method is that if a wrong order is not detected early, it can make finding the cause more difficult.

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4. Inventory process

Inventory counting is one of the important tasks, ensuring accurate statistics of the actual quantity of goods to make timely adjustments to meet the needs of the business. The inventory counting process includes 7 basic steps as follows:

• Step 1: Based on data in the management software and reporting on inventory status, the company needs to build a detailed inventory statistics table.
• Step 2: The inventory taker needs to record the inventory quantity on the information board. This table will be used to compare and contrast actual data with data on the system.
• Step 3: Check the actual quantity of goods in the warehouse and compare with the reported quantity. If there is a discrepancy, the storekeeper and accountant need to provide a detailed explanation.
• Step 5: The accountant adjusts the difference based on actual data after explanation.
• Step 6: Complete the inventory inventory record and ask the relevant party to sign for confirmation.
• Step 7: After completing the inventory counting process, if an error occurs, the manager needs to investigate the cause to apply immediate remedial measures for the next inspection.

5. Some experience in inventory counting

To make the inventory process effective, businesses can refer to some useful experiences below:

5.1 Classification of inventory products

Business experts have advised businesses to divide inventory into many different groups. Group A includes items with high prices and low import quantities. Group B includes items in the middle price range with suitable selling prices. Group C are products with low import prices and quick sales.

This division helps businesses find effective solutions for inventory counting as well as prioritizing inventory groups of products first to minimize storage costs for businesses.

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5.2 Fully track product information

Businesses need to store complete information about products in warehouse including SKU, barcode, batch number, origin and supplier. In addition, managing the costs of each item is necessary to find appropriate change solutions.

5.3 Consistency in working style

Inventory counting needs to ensure consistency in working methods to avoid annoying problems such as mismatched data and errors in the inventory process. Warehouse and import staff need to have the same unified working method, helping to ensure smoothness, efficiency and minimize unnecessary errors.

5.4 Applying technology to inventory counting

One way to ensure a business's inventory counting process is quick and accurate today is to use modern technology and management software. Using spreadsheets or manual notebooks has many limitations that are not suitable for the 4.0 technology era.

Businesses need to consider applying inventory management software to their management activities to increase competitive advantage. The software will help simplify the inventory management process and ensure greater accuracy than traditional methods. However, before choosing software, businesses need to consider carefully to ensure it suits their needs.

6. Some mistakes when performing inventory checks

Although inventory counting has the purpose of accurately counting the actual number of products, in some cases the practitioner may still make some of the following mistakes, causing the results not to be as expected.

6.1 Not preparing the warehouse space in advance

The most common mistake is lacking specific estimates and not ensuring enough space for a large quantity of goods, leading to time lost in loading and unloading goods during inventory. To avoid this mistake, practitioners should ask themselves questions to clearly define the situation and devise appropriate plans:

• Is the space tidy?
• Are the products in the warehouse arranged correctly?
• Are the products arranged easily accessible for inventory?

6.2 Lack of human resources

In addition to space, personnel is also an important factor contributing to the inventory process. In some cases, businesses lack qualified personnel to undertake this work, causing inventory delays and difficulties in monitoring and handling problems.

6.3 No supervision

The inventory process will not be effective without the necessary supervision. Therefore, businesses need to monitor from the beginning to ensure all stages are carried out strictly and accurately to reduce errors and risks.

6.4 Failure to handle errors promptly when encountered

In some cases, errors may occur during the inventory count process. If you do not promptly find the cause and how to handle even a small error, your business may face future business risks due to inaccurate data.

6.5 Failure to prepare in advance for destruction of inventory

Failure to prepare procedures and documents related to inventory destruction in advance can result in unnecessary inventory costs, consuming business resources, making warehouse management ineffective.

In this article, 1C Vietnam has provided information about the inventory counting process as well as some useful implementation experiences. If you are facing difficulties with inventory counting, businesses can also refer to software that supports inventory management to increase efficiency and reduce human resources costs. For more detailed information about this solution, please contact 1C Vietnam now.

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