What is the best way to conduct an inventory audit?

3 Organize your inventory

The third step is to organize your inventory into categories and subcategories that make sense for your business. For example, you can group your inventory by type, such as dry goods, dairy, meat, produce, beverages, and so on. You can also subdivide your inventory by location, such as freezer, fridge, pantry, or shelf. By organizing your inventory, you will make the counting process more efficient and consistent.

4 Count and measure your inventory

The fourth step is to count and measure your inventory according to the list you prepared. You should start with the items that have the shortest shelf life, such as perishable foods, and move on to the ones that last longer, such as canned goods. You should also count and measure your inventory in the same order and manner every time, to ensure accuracy and comparability. You can use different methods to count and measure your inventory, such as weighing, counting by units, or estimating by volume. You should record the quantity of each item in your inventory management software or spreadsheet, along with the date and time of the audit.

5 Calculate the value of your inventory

The fifth step is to calculate the value of your inventory based on the quantity and price of each item. You can use different methods to assign prices to your inventory items, such as FIFO (first in, first out), LIFO (last in, first out), or WAC (weighted average cost). You should choose the method that best reflects the actual cost of your inventory and the market conditions. You should multiply the quantity of each item by its price and add up the total value of each category and subcategory. You should also compare the value of your inventory with the value of your sales and purchases, to calculate your inventory turnover ratio and your food cost percentage.

6 Analyze and report your results

The sixth and final step is to analyze and report your results from the inventory audit. You should look for any discrepancies between your physical inventory and your recorded inventory, and identify the possible causes and solutions. For example, you may find that some items are missing, damaged, expired, or overstocked, and you may need to adjust your ordering, storage, or usage practices. You should also look for any trends or patterns in your inventory levels, such as seasonal fluctuations, peak periods, or slow-moving items, and plan your inventory accordingly. You should report your findings and recommendations to your manager, accountant, or owner, and use them to improve your inventory management and control.

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?