Inventory (2 of 2): Inventory Loss And Observation - John M. Leask II CPA/ABV, CVA

Inventory

Part 2 of a 2 part series

Warning Signs:

    • Decreased inventory turnover.
    • Increase in inventory days outstanding.

  • Frequent inventory shortages.
  • Sudden growth in inventory.
  • Pilferage, theft or missing assets.

Steps to Improve: MINIMIZING INVENTORY LOSS

  • Guard against losses from employee theft.
  • Put in place safeguards to reduce theft.
  • Minimize storage sites, control access; centralize ordering, and enforce.
  • Use what’s on hand first, before substituting.
  • Lock the supply closet.
  • Learn from shortages, overstocked, obsolete, or slow moving items.
  • Dispose slow moving and obsolete inventory.
  • Double check scales for accuracy.
  • Assure adequacy of insurance for inventory variance.

Steps to Improve: INVENTORY OBSERVATION

  • Watch for slow moving, obsolete items.
  • Watch for inventory security lapses.
  • Watch for inventory disproportionate with sales of an item.

Back to The Business Doctor

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