How do you conduct a physical inventory audit?

1 Plan ahead

Before you start the audit, you need to plan and prepare for it. You should decide on the scope, frequency, method, and schedule of the audit. You should also assign roles and responsibilities to your staff, train them on the procedures, and provide them with the necessary tools and equipment. You should also communicate with your customers, suppliers, and other stakeholders about the audit and how it may affect your operations.

2 Choose a method

There are different methods of conducting a physical inventory audit, depending on your needs and preferences. You can choose to do a full audit, where you count and verify all the items in your warehouse at once, or a partial audit, where you count and verify a portion of your items periodically. You can also choose to do a cycle count, where you count and verify a specific category or location of your items regularly, or a spot check, where you count and verify a random sample of your items occasionally.

3 Prepare the area

Before you begin the counting process, you should prepare the area where the audit will take place. You should clear any clutter, debris, or obstacles that may interfere with the counting or visibility of the items. You should also label and organize the items according to their categories, locations, and quantities. You should also separate any items that are damaged, expired, or obsolete from the rest of the stock.

4 Count and record

The next step is to count and record the items physically. You should use a standardized and consistent method of counting, such as by units, cases, pallets, or weight. You should also use a reliable and accurate tool of recording, such as a barcode scanner, a handheld device, or a paper form. You should follow the instructions and guidelines of your inventory system and avoid any distractions or interruptions during the counting process.

5 Compare and reconcile

After you finish the counting process, you should compare and reconcile the results with the records in your inventory system. You should identify and analyze any discrepancies, errors, or variances between the physical count and the system count. You should also investigate and correct any causes or sources of the discrepancies, such as data entry mistakes, mislabeling, misplacement, or theft. You should also update and adjust your inventory system accordingly.

6 Report and improve

The final step is to report and improve your physical inventory audit. You should prepare and present a report that summarizes the findings, outcomes, and recommendations of the audit. You should also share and discuss the report with your staff, managers, and other stakeholders. You should also evaluate and improve your inventory management practices, policies, and procedures based on the feedback and lessons learned from the audit.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?