Guide to implementing Inventory Control Operating Procedures

Implementing Inventory Control Operating Procedures

Many businesses find it a hassle to record inventory. Business owners who do not record inventory on their books will find that they are unable to ascertain the true performance of their business and the net worth of the business is understated. It makes it difficult for business owners to explain performance fluctuations, obtain working capital loan and may even invite tax queries.

Poor Inventory management and control may lead to

• Lost sales - if there is insufficient inventory to meet the order of a customer;

• Stock write off - if the inventory has a shelf life or becomes obsolete due to change in technology;

• Tight cash flow - if there is too much inventory or large quantity of slow moving inventory;

• High storage costs - if renting of extra space is required to store the inventory; and

• Pilferages - if there is a lack of a security system and an absence of a trail of inventory movements.

As inventory can be one of the major assets of the business, it is important to implement some basic controls as follows:

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Download a flowchart that illustrates a typical inventory control flow to guide you in the organisation of documentation flow and filing as well as in the implementation of your business' operating procedures and control.