What is the inventory for?
What are the different stages of inventory counting?
Which products are affected by the inventory?
What are the different types of stock inventories?
What is the inventory for?
Carrying out an inventory of stocks aims to ensure the physical existence of stocks and to ensure their number.
The physical inventory is mandatory by law. It is to be carried out on the closing date of the financial year and it is essential in order to be able to draw up the company's financial statements.
The physical inventory is a mandatory step to assess a company's inventory at year-end.
What are the steps of the physical inventory of stocks?
Triggering: The inventory is generally planned for the end of periods, monthly, quarterly or at least annually. It can also be triggered after the discovery of an anomaly in the stocks.
Counting: This involves counting the exact quantity available of the various items in stock. In general, a double count is organized by different teams to make the results more reliable.
Reconciliation: After the count, a variance analysis is usually conducted. The objective is to reconcile the quantities noted during the inventories with the theoretical quantities resulting from the inventory management system. A reconciliation between the two data makes it possible to understand the discrepancies and explain them. It also makes it possible to improve storage procedures and systems in the event of anomalies observed.
Finalization: During this phase, the actual quantities are integrated into the inventory management system for updating. Adjustment accounting entries are also made. It is during this phase that the stocks are valued.
What products are affected?
Stock inventory relates to different types of products, depending on the activity:
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for a trading activity (trade): it concerns
products purchased but not resold;
the Expendables
for a production company, it concerns:
raw materials that have not yet been used in the production of the goods,
unsold finished products,
unfinished products still in the manufacturing process (work in progress),
the Expendables,
the packages.
What are the different types of stock inventories?
In order to avoid the workload brought by the annual physical inventory which remains a legal obligation, some companies choose different inventory methods.
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Stock counting can be done using three different methods:
1. Intermittent inventory:
This method involves the periodic counting and valuation of remaining stocks at the time of physical inventory operations, generally carried out at the end of each financial year.
2. Permanent inventory:
This is an accounting inventory that allows you to know at any time the recorded movements and therefore to know throughout the year in a continuous way the existing items in stock in quantity and value.
3. Rotating inventory:
The rotating inventory is the periodic counting of stocks over the year.
With rotating inventory, lists of assorted items are provided for well-defined periods, and the available quantity of each list is calculated several times during the year.
The rotating inventory allows in particular:
Reduce or even eliminate the practice of an annual inventory (generally tedious and costly);
Avoid stock shortages that can have significant consequences on business operations (stoppages, bottlenecks, lost sales, order cancellations, etc.);
Detect discrepancies and anomalies more quickly