How often do you audit your personal finances? Much like your personal finances, it’s also crucial to keep track of what is going on in your warehouse and inventory. If you don’t work on balancing books in this case, you will end up in serious financial losses.
That’s where the concept of warehouse and inventory audits comes into play. It sounds pretty much like your personal finances audit, right? Well, it’s a bit different. But what is it exactly?
No matter whether you’re a newbie to this audit or an experienced business manager looking for a go-to checklist and some secret best practices, this blog post will help you ace your inventory management within a few minutes. Read on & explore.
What Is a Warehouse and Inventory Audit?
A warehouse audit is an inspection or audit of the entire warehouse, including the inventory, financial statements, operations and employees. The goal of this audit is to assess the efficiency and performance of the warehouse technologies and employees, thus highlighting the areas of improvement.
Now, are you confused between warehouse audit and inventory audit? It’s no doubt that these terms are used interchangeably and often together due to the slight difference in its meaning. However, you may understand that an inventory audit is a part of the warehouse audit.
Thus, warehouse audit is a comprehensive term that encompasses accounting audits, compliance with policies audits, OSHA audits, etc. Now, besides assessing the warehouse performance, what are some other reasons why you should conduct regular warehouse and inventory audits?
Well, it provides us with a full-fledged report on the working of the entire warehouse. Not just this, it also helps in the identification of loopholes and pain points in the operations and the entire process as a whole. It also helps you identify specific points and processes which you can optimize for cost savings.
Now, who should conduct this audit? You may hire a permanent team of professionals, such as a certified audit individual or firm. This team will personally look into all the processes and operations round the clock and then work on the audit report.
Otherwise, you may also go for an external audit team. Although this will be costly, you’ll have comprehensive and more accurate results. You’ll also get to know your industry’s performance against some of your key competitors and how you can optimize it even more.
Your Go-to Checklist for Accurate Warehouse and Inventory Audit
What are the key points you must look after while going for an accurate warehouse and inventory audit? Well, here’s your go-to checklist for the same. Dive in!
1. Warehouse and Inventory Space
The warehouse is your “personal finances,” and the inventory is your “wallet.” Just like you need to overlook the amount you put in and take out of your wallet, it’s also essential to look after what goes in and out of your business’s wallet, i.e., inventory.
Firstly, you need to ensure that you have enough area in your inventory for all the items to be stored in an organized manner. While storing, you also need to ensure that your storage complies with the safety protocols in the industry. Your inventory must be clean, pest free, and must comply with the safety guidelines.
You’ll save tons of money which would otherwise have been wasted due to product spoilage. Besides safe and secure storage of all products, you must ensure that the hazardous materials and products are stored carefully. They must be labeled properly and must not be stored at common locations.
2. Equipment
Much like the warehouse and inventory space, you also need to check how your inventory equipment is functioning. Let’s say the elevator is malfunctioning due to some reasons. If you don’t get it fixed at the earliest, employees will have to waste a lot of time carrying a batch of products from the ground floor to the fourth floor. This ultimately reduces their efficiency and productivity.
Thus, you need to look into how the equipment in your warehouse and inventory is functioning and being maintained. This equipment may include ladders, storage racks, loading bay doors, conveyors, electrical equipment, and machines.
Besides, you also need to focus on some other questions, such as:
- Are employees using the technologies installed to help them improve their efficiency?
- Do they need more training to handle these equipment?
3. Operations
Managing warehouse operations along with the inventory is quite similar to managing the money in your wallet. Your warehouse and inventory audit must include parameters and factors which assess the efficacy of your operations.
How organized and smooth are your warehouse operations? Does your team receive an inventory of good quality on time? Do pickers pick up orders on time? Are employees working quickly and efficiently without creating traffic and congestion?
You need to note your observations on such key parameters and work on areas of improvement. Remember, you can excel even with a small inventory if you have the strongest and most efficient operations.
4. Compliance with Safety Protocols
We’ve discussed how important it is to ensure that your products comply with the safety protocols of the industry. Besides this, you also need to ensure the safety of your employees, who are putting in their laborious hours for the smooth functioning of your business.
Thus, your warehouse and inventory audit checklist must also include various points wherein you can check if employees are following the safety protocols made for them. For e.g., you need to look into if the walkways are well-lit and clean without any hindrances or obstacles.
You need to ensure that employees are wearing their safety gear all the time. Besides, you’ll also have to look into how the fire extinguishers are stored. In this step, you basically need to review all those things and components which are related to your employee’s safety.
5. Employee’s Performance
Your employee’s performance as an individual and as a team is a crucial factor in deciding your business’s future. How are they working as a team? Do they communicate well?
Does each of them try to give their best as an individual and exceed goals? Do they abide by the safety rules and protocols? Are they busy wasting time and procrastinating their work for their juniors?
You need to look after all such factors to assess how your employees are performing and what you can do to assist them in improving their performance and efficiency.
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Top 5 Warehouse and Inventory Audit Best Practices
Now that you know the key areas you need to focus on while doing your warehouse and inventory audit, here are some best practices which you must follow.
1. List and Define the Purpose of the Audit
Before getting started on your warehouse and inventory audit, you must be clear about why you want to conduct this particular audit. You need to decide the locus of focus for the audit and the parameters based on which you’ll judge.
Moreover, once you’ve decided which areas to assess, you should prepare a checklist keeping in mind to cover all important areas you wish to cover. These are prerequisites that will ensure that you are best prepared to get started with the audit process.
2. Prefer Physical Counts
Throughout the year, you are dependent on your inventory management system for tracking the inflow and outflow of your inventory. But, during an inventory audit, we would suggest you go for physical counts. This will help you assess the accuracy of your automated systems and unveil discrepancies, if any.
Now, you might question why we suggest physical counting over other methods. Well, this way, you’ll get involved in the process and can identify any underlying discrepancies between the actual inventory count and that recorded in your system.
3. Monitor Warehouse Operations
We’ve already discussed the importance of warehouse operations in your business. Focus on how your business is functioning and the key processes involved in the complex process. You also need to ensure that key processes like order fulfillment, quality control, and compliance with safety protocols are being obeyed and implemented strictly.
4. Interact with Your Employees
You can have a bunch of professionals trying to evaluate your entire warehouse and audit it. But, when your employees are not involved in the process, you will lack some serious evaluatory points.
It’s why we suggest you interact with your employees. As they are the sole persons directly involved in the business operations, they can identify the pain points better and come up with better feedback and suggestions.
5. Analyse Audit Results & Work on Recurring Problems
Once you’ve completed an initial round of warehouse and inventory audits, you need to analyze the audit report and discover the underlying problems in your warehouse and inventory management. You may also take the help of a team of analysts for this. This analysis will help you discover the areas of improvement you need to focus on.
Your main goal after an audit must be continuous and consistent improvement. Prepare suggestions by consulting with experts and discuss them with your employees. Also, look into how your suggestions are being implemented by the employees and what you can do to make their efforts more fruitful.
Moreover, once you start seeing results, go for another round of audits. Repeat the audit process and focus on improvement every single day.
FAQs: Inventory Audit
1. What is a warehouse and inventory audit?
A warehouse audit is an inspection or audit of the entire warehouse, including the inventory, financial statements, operations and employees.
2. What is the purpose of conducting regular warehouse and inventory audits?
The goal of regular warehouse and inventory audits is to assess the efficiency and performance of the warehouse technologies and employees, thus highlighting the areas of improvement.
3. What are the various methods for conducting a warehouse and inventory audit?
The various methods for conducting a warehouse and inventory audit are:
- Physical inventory counts
- Cycle counts
- Cut off analysis
- Overhead analysis
- Freight costs
- High-value items or consignment
- Finished goods cost analysis
4. Prepare a go-to checklist for accurate warehouse and inventory audits.
Here’s your go-to checklist which you must consider for an accurate warehouse and inventory audit:
- Warehouse and Inventory Space
- Inventory
- Equipment
- Operations
- Integration and Utilisation of Technology
- Compliance with Safety Protocols
- Employee’s Performance
5. List some best practices for warehouse and inventory audits.
Here are 7 best practices which you must implement for a perfect warehouse and inventory audit:
- List and Define the Purpose of the Audit
- Prefer Physical Counts
- Analyse Inventory Statistics
- Monitor Warehouse Operations
- Analyse Audit Results & Work on Recurring Problems
- Focus on Regular Audits & Consistent Improvement
- Interact with Your Employees
Wrapping Up
A warehouse and inventory audit will help you evaluate how your business, employees, and their operations and strategies are bringing colors to your business. It’s a great way of identifying potential loopholes at the earliest, thus helping in solving them. So, when are you planning to have a warehouse and inventory audit?
Do you need any more help? Check out our indispensable solution, QodeNEXT. Please feel free to contact us now to help you make the best choice to manage your fleet and optimize your process!
