Is your inventory getting the better of you?
Properly managing inventory is a complex task for many businesses. One way to increase the accuracy of your inventory numbers and speed the auditing process is by employing cycle counts. 415 Group Senior Manager Matt Campanale, CPA, delves into some of the best practices.
In my experience as part of the audit and assurance department at 415 Group, there’s no doubt inventory management is a crucial part to any small business. No matter the business you’re in, if you have inventory, this is a critical step towards accurate records and improved cash flow. Most small businesses don’t realize inventory is actual cash sitting at their facility.
As auditors, we’re required to verify inventory records and procedures for our clients during our audits. We encourage our clients to do frequent counts on their inventory to ensure they’re working with the most accurate inventory balances at all times. On top of that, an accurate inventory helps speed up the year-end closing process.
One way to improve inventory records and support accuracy is by performing frequent cycle counts. Infrequent counts often lead to large adjustments being made at the end of the year that can affect a company’s bottom line. Yet, there’s no magic formula on how often to conduct cycle counts on your inventory. We have a client that has a large amount of parts inventory. This manufacturer conducts weekly cycle counts due to the small size of their parts and a high number of SKUs. The key is having well-documented procedures to find a schedule to keep your team consistent.
We assist our clients by suggesting best practices for their inventory management. We meet with the actual people who do the counting and walk through their procedures. As needed, we observe the cycle counts personally. Understanding our clients’ business is how we provide quality solutions.