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.The process of physical inventory is to count the inventory one by one to record the available inventory. Correct goods management can help avoid shortages or excess goods (often referred to as overstock).
Since this is a manual process, it can be very laborious. A large part of the warehouse staff is involved in this process, so good organization is required to carry it out as quickly and efficiently as possible.
Inventory is one, if not the most important, of a company’s most important assets, so it is imperative to closely monitor it. This article explains how a physical inventory works. It also provides answers to some of the most common questions about this topic.
Typically, for inventory verification, warehouse workers walk down the aisles, manually counting and writing down all of the products stored on the shelves.
An inventory control is essential for the company, because it increases productivity. Knowing the exact location of each product makes it easier to put orders and avoids delays, which translates into greater customer satisfaction.
Physical inventory helps identify discrepancies, identify their causes, and prevent them from recurring. For example, it could happen that a warehouse worker cannot find a product that should theoretically be in inventory.
A search of the entire warehouse would reveal that this product was stored in the wrong location and appropriate measures could be taken to reduce such errors.
The physical inventory is also used to check the products and ensure that they are in proper condition. Since the products are counted individually, it is possible to visually check whether they are in good condition. This is particularly important when managing a large number of items.
Another type of verification is carried out in a company that involves fixed assets. The physical verification of fixed assets is a process of accurately examining whether the fixed assets listed in financial statements of a company exists in reality or not.
Physical verification of assets is the process by which the existence of a property is verified for its use in operations as well as its location. A physical check of the property is performed regularly to ensure proper control, accurate reporting and accountability.
For all capitalized property/fixed assets, a physical check should be performed at least once per fiscal year. For assets that are not subject to a physical audit, i.e. unfunded/non-serialized assets, a physical audit is performed if necessary, at the discretion of the management of the entity.
In all cases, the results of the physical verification must be reconciled with the records of the property.
Physical verification helps ensure that asset reports at the end of the reporting period reflect the actual holdings of the entity and that accurate and quality ownership records are kept to improve decision making and accountability.
The physical verification function is the responsibility of the delegated manager (s) of an entity. Consequently, the latter may decide to create a centralized independent unit responsible for carrying out the inspection, physical verification and reconciliation of data relating to the assets of the entity.
The goal of physical verification of fixed assets is to compare actual assets with theoretical or book assets. This can be done with the help of consulting physical verification of fixed assets services offered by CAC.