For many financial executives, inventory will take a major chunk of your company’s current asset. It’s therefore important that you should set up a clear policy and procedure for the conduct of the physical stock-count.
Broadly speaking, the policy and procedure of physical stock-count should consider the following areas:

a. Before Physical Stock-count,

b. During the Physical count,

c. After the count

Before the Physical Stock-count:

Salient points to adhere:

• Clear written instruction should be circulated to all the staff taking part in the count, the auditors and management to inform them: the avenue, date and time, specific location of the inventory and name of personnel involved in the proposed stock-count,
• Proper preparatory tidying of the premises, factory and store area,
• Preparatory marking of items not readily identifiable,
• Proper marking and segregation of third parties goods or those not belonging to the company,
• Preparation of stock sheets to identify items to be counted and providing columns for recording unit of measure, quantity counted, quantity damaged or sub-standard,
• Establishing proper cut off by closing off goods inwards and outwards records and recording the last numbers prior to stocktaking of all the documents controlling stock movements,
• Ensure that the stock records are updated and reflecting the most current situation,
• Ensure the stock-sheets or tags are pre-number,
• Proper arrangements to minimize and control the movement of inventory,
• Proper delegation of responsibility of stock-count personnel by putting up a counter and checker team to segregate personnel who are responsible for the safe custody of the inventory and those who are competent to identify the goods and their state of completion,
• Ensure proper and consistent methods of weighing, counting, recording and identification of goods and their state of completion,

During the Physical Stock-count:

Salient points to adhere:

• Ensure wall-to-wall counting instead of doing it other ways,
• Avoid the duplication or omission by marking or tagging the stock already counted,
• Record the stock-count figures in ink or ball-pen. It must not be recorded in pencil,
• Ensure that any alterations should be initialed by both the counter and checker,
• Make sure that the condition i.e. damaged, obsolete, slow-moving or substandard are noted next to the stock item,
• Make sure you conduct random checks on the opening of sealed package, crates, etc is perform,
• Ensure that we fully cooperate with the internal and external auditors.

After the Physical Stock-count

Salient points to adhere:

• Ensure all pages of the stock sheets are initialed by the relevant counter and checker,
• Confirm that all the stock sheets, tags ,etc have been accounted for by the use of controls based on serial numbers( pre-number ),
• Always retain all the rough stock sheets, tags ,etc,
• Compare and check the physical results with the stock records,
• Have a proper established procedure laid down for investigation and adjustment of material adjustment of material differences.

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Related Entries

• Inventory- Introduction
• Month End Close: Proper Classifications And Others
• How Good Is Your Inventory Management?
• Using Days Inventory Outstanding (DIO) for Better Stock Management
• Radio Frequency Identification System (RFID) for Inventory Control