Category Archives: 2 Processes

Counting sheets

When performing the stock count, people doing it need to be able to write down the amounts they have counted. While writing essentially isn’t a problem, a few things need to be kept in mind when dealing with sheets the results are written onto.

Since you want the whole process to be as fair and correct as possible, your count sheets should include as minimal information as possible. However, depending on the type of inventory, there may be couple of specifics you want to consider on the counting sheets.

When there are different types of inventory in stock, you might want to put the unit type on the count sheet – i.e. pieces, boxes, kilograms, tons, meters etc. This way you ensure that the persons counting the stock do know in which units it should be counted.
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Planning the physical stock count

With owning inventory comes also the responsibility to confirm its existence and obviously also the fact if everything in storage is also accounted for on the balance sheet. The way to do it is to perform stock counts every now and then. Depending on the stock level (i.e. how many items there are) and also the turnover and nature of the goods, it may be that stock counts are done on monthly basis or only once a year.

Normally in large production companies with thousands of items on their stock listing the stock counts are done more frequently than in companies with minimal stock. Also the lower the stock turnover the less frequent are stock counts obviously. As a general rule, the stock count needs to be done at least once a year and close to the end of the financial year.

The reason behind this is that you want to be sure of the stock levels on your annual financial statements so hence the closest date you pick to the financial year end, the better.
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Optimize the stock levels

Companies with stock struggle daily with appropriate stock levels – they need to ensure enough items are in stock to satisfy the customers and on the other hand make sure any article isn’t just piling up and ageing in the warehouse. The stock levels need to be optimized, but how to best achieve this?

There are two things we have found to work best in practice – regular review and responsibility.

What we mean with ‘regular review’ is really a weekly or a monthly (essentially as often as needed and reasonable in your industry) meeting where the stock levels are compared with sales, new minimum stock levels determined, action plans decided for slow moving goods etc. With this the stock levels are under a constant monitoring and provided that warehouse responsible personnel as well as sales and management team is involved, proper actions are decided and taken.
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Best practices when it comes to confirmation letters

When in essence the confirmation letter procedure isn’t seemingly that difficult – you write a balance and ask if the other party agrees with it – there are however a few things we suggest to keep in mind when it comes to confirming accounts payable and receivable balances.

First off as for the letter itself, you make sure you have the right address, right balance and all the other information like contact where to send all questions and replies etc; however, there is one thing you may want to avoid when preparing those letters. Avoid the clause ‘In case of no reply from you, we deem our balance correct’ like sentence on the confirmation letter. The reason behind this is fairly obvious; the counterparty may simply have not received the letter due to various reasons or needs a bit more time or convincing to actually reply to your request. With this sentence you have no way of knowing whether they actually agree with the balance or not.
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Confirming balances – accounts payable and receivable

During the normal course of business you buy and sell goods or services and as a byproduct, before the cash really moves, you have payables and receivables with their due dates on the balance sheet. When the balances are settled, they are as a result gone from the balance sheet. Balances come and go during the course of business; however, there should be a way to make sure they are all fairly presented.

Essentially the accounting system should have a ledger to keep record of all balances by supplier and costumer. However, most businesses have numerous suppliers and / or customers meaning a human or systematic error may happen very easily – either double entry, entries to wrong supplier or customer, mistyped balances etc.
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Inventory held by third parties

For numerous reasons – no space of your own to storage goods, outsourcing efficient and top of the line storage service, unwillingness to deal with storage maintenance and related equipment and services on your own – whatever the reason may be, there are types of goods and types of companies who use outsourced service to storage their goods and materials.

Whilst this saves you more space, time and almost certainly inventory dealings like handling, shipping etc, there are still a couple of things you should be aware of when having inventory held by third parties.
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Activity based costing – costs per unit

As we have already discussed, activity based costing lets you measure the expenses certain process generates. This in turn helps in assessing either any alternative is necessary in terms of materials, methods or entire procedure. It also helps in determining the sales price for end or byproduct.

Although you may have the expenses measured in total, say on maintenance we used before 10,000 EUR, it still needs to be split onto measurable units. Now this part is way trickier than collecting all related expenses together. In order to do this, you need to follow the next steps.
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