Preparing year-end inventories: five tips for retail companies

Select the right inventory procedure

There are three types of inventory procedures:

• Physical inventory:
  All assets and liabilities are physically counted, measured or weighed.
• Inventory sampling:
  Only a portion of the assets and liabilities are physically counted. The results are then extrapolated to the entire inventory.
• Perpetual inventory:
  The inventory is updated on an ongoing basis.
  Physical stocktaking is usually the best choice for retail companies. It offers the highest level of security in terms of correct results.

Create an inventory plan

An inventory plan describes everything important for carrying out an inventory. It ensures that the inventory is carried out efficiently and effectively and that the results are reliable. A complete inventory plan consists of an inventory plan, a personnel plan and a schedule.

The following information should be included as a minimum:

• Date
  When will the physical inventory be carried out (preparation, execution and completion)? What is the schedule for the day of the physical inventory?
• Locations
  At which locations will the physical inventory be carried out?
• Item
  Which assets and liabilities are recorded? What information is used to record them?
• Methods
  Which inventory methods are used?
• Personnel
  Who carries out the inventory? Who is responsible for management and control?
• Materials
  What materials are needed?

Train inventory staff

The inventory staff physically carry out the inventory. The quality of the results depends on their diligence. It is therefore important to train them carefully. They should be aware of the importance of stocktaking and that it depends on their diligence. It is particularly positive if you succeed in arousing their curiosity: What do the inventory staff learn about “their” company in the course of the inventory?

The training should include the following content:

• What are the tasks and duties of stocktakers?
• What do they need to know about the importance of stocktaking in order to carry out the task with the necessary care?
• What materials and aids are available to them?
• Who can they ask in case of doubt during the inventory?

The time required for training is often underestimated: bear in mind that you cannot assume a high school education or an overview of the weal and woe of German accounting. There may also be language barriers. Therefore, start early and prepare practical exercises.

Prepare storage locations

The storage locations must be accessible and secure for stocktaking so that the stocktakers have access to all items and can record them.

Check inventory results

Check the inventory results carefully. If you notice deviations from the accounting data, get to the bottom of them and clear them up. With careful preparation, the annual inventory will be much easier and promises reliable results.

Implement the strict lower of cost or market principle with “Valuation 365” from CKL

“Valuation 365” is directly linked to the item movements of Microsoft Dynamics 365 Business Central.
You can use the app to correctly prepare your current assets and value them in accordance with the statutory valuation regulations. “Valuation 365” allows you to devalue your products according to the strict lowest value principle. At the same time, your devaluation decisions are fully documented.
The best way to find out for yourself is to attend one of our next webinars!