Methods for Retailers to Conduct Inventory Audits
These approaches assist retailers to avoid stock outages and dead stock by double-checking inventory counts. Even with RFID and barcode tagging, inventory errors, typos, and miscounts are common. Inaccuracies result in inefficiencies, missed revenues, and challenges with planning and forecasting. According to a 2019 research conducted for the ECR retailer-manufacturing working group, roughly 60% of retailers’ inventory records were erroneous.
Methods of inventory auditing include:
Physical Inventory Audit: This procedure compares financial records to physical inventory counts. An accountant examines the physical count in a formal audit. Companies frequently suspend operations during audits to ensure that no goods move. Physical inventories take a lot of resources, effort, and planning for major firms. On the plus side, a physical inventory is a great way to keep inventory shrinkage under control.
Spot Checking: This approach entails checking a certain department or storage area on a regular basis. Spot checking is a useful way to catch errors in inventory procedures before they turn into bigger concerns. Managers should do inventory spot checks on a regular basis, especially after implementing a new plan or making a significant change to the inventory management strategy.
Cycle Counting: This method requires a merchant to count a portion of their inventory on a daily basis. This form of count does not necessitate shutting down operations, while most retailers still conduct a full physical inventory on a regular basis. Cycle counting is ideal for businesses with a lot of inventory that can’t afford to stop working to conduct comprehensive physical inventory inspections. For businesses that are unable or unwilling to employ inventory management software, this strategy may be problematic. Companies must keep precise records in order to cycle count.