Whether you are an experienced inventory management specialist or someone who is starting to get familiar with inventory count. Whether you are a forklift driver who stacks skids after a thorough inventory count or a cherry picker operator who goes high up on the shelving rack to count the inventory. Whether you are being trained as a cashier at the gas station or you supervise employees at a multi-story convenience store, Inventory count is an essential part of any business. Employers and owners use inventory count to track and manage goods. They also use it to figure out gross sales and profit. Moreover, inventory count is used to figure out loss due to missing or damaged products, theft or even bad management. There are several ways, methods, and techniques to perform inventory count as followed by business throughout the world.
Ever since the introduction of RF scanners, inventory count is becoming increasingly popular via perpetual inventory system. In this system, incoming and outgoing merchandise picked up by the RF scanner is then entered on the computer. The automatic or manual entry scans for the item number, description, and quantity. Incoming merchandise gets added to the inventory system while outgoing merchandise is subtracted from the same inventory system. Though this type of inventory system is highly accurate, the physical count is occasionally done due to damaged, lost or stolen items. Next, there is periodic inventory system used by small stores like cafeterias, restaurants and convenience stores. Physical inventory count in these stores is taken at least once or twice a year. Since inventory is usually consumed every day, it is not necessary to hire employees for inventory count except for balance sheet, income statement and other financial statements. The main ingredients for entering on to these financial templates are the cost of goods sold and cost of a company’s ending inventory. High priced items like jewelry, auto and antiques are calculated using Specific Identification method. When one knows the original purchase price of an item, the number of goods sold can be figured simply by subtracting the cost of ending inventory by cost of goods originally available for sale. On the other hand, the weighted average method simply figures out the average cost of goods sold based on average unit cost. The first in first out method works out the cost of goods sold based on first come first serve method. The older inventory is eliminated first when calculating the cost of goods available for sale. This method could be used by a business that deals with products having immediate expiry dates. Fish market, paint store, and restaurant are examples of business that might use this method. On the other hand, the last in last out method is based on the last items bought from the store. Consumer electronics, computers and DVD’s often change with the trend in the consumer market. Since the latest trends are assumed to be sold first, LIFO (last in last out method is used). With gross profit method, however, things get little complicated. Business must now keep track of net sales, average gross profit rate, beginning inventory and net purchases. Inventory turnover is the average of beginning and ending inventory. Textbooks and other types of business might use this analytical form of inventory. Extra inventory means space consumption and extra insurance coverage while a low turnover means obsolete products or less consumer demand. As a result of the loss of these factors, some business has even developed “Just in time” inventory system (JIT) which relies on suppliers supplying products as per consumption or need. Most or all of these forms of inventory management systems also work out their overhead expenses. These expenses could be calculated via floor space or sales volume. Overall, Inventory count and management can be looked upon as different applications that suit different types of business.
In conclusion, there are various methods and techniques for counting inventory. Extensive research could be profitable for anyone whether one is an experienced accountant or an entrepreneur seeking experience!