Page 64 - Accountancy_F5

Inadequate technology or systems: If the Inventory auditing: Conduct frequent
technology or systems used for inventory inventory audits, like daily inventory
management are outdated or inadequate, it counting, to minimise human error and
can lead to errors in recording and tracking provide more accurate and up-to-date
inventory. inventory data.
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Lack of standardised processes: Without Establish clear policies and procedures:
standardised processes for receiving, Having clear, written policies and procedures
storing, and managing inventory, there
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can be inconsistencies and errors in the for inventory management can provide a
inventory records. guide for employees to follow. This can
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help ensure consistency and reduce errors.
Strategies for minimising
incidences of inventory errors Invest in technology: Equip staff with the
To minimise and ultimately eliminate the right inventory technology for the inventory
problem of inventory errors or discrepancies, management process. Use inventory
businesses must adopt and execute a variety
of strategies, including the following: management software for invoices and
purchase orders to replace manual inventory
Improve security: Enhance security at documentation, which is subject to human
business premises through measures like error. Modern software solutions like
installing surveillance cameras and using
mirrors to provide extra sightlines for easy barcode scanning and other technologies
staff monitoring. can track items as they move through the
warehouse.
Double-check system: Incorporate a double-
check system when receiving inventories The impact of inventory error on
to minimise mistakes in inventory records. the statement of profit or loss
An automated single system can also be Inventory errors can significantly influence
installed for data transfer from one system the reported cost of sales and net profit of
to another.
a business. An error in the inventory value
Hire the best employees: Find employees implies a corresponding error in the cost
who are a good fit for your firm. Check of sales and net income. These errors may
references to ensure they worked well with result in an overstatement or understatement
others in their previous jobs and have a track
record of honesty and dedication. of both the cost of sales and net profit.
Net profit and closing inventory, which
Invest in training: Regular training sessions are reported in the statement of financial
can ensure that all employees are up-to- position as part of retained earnings and
date on the best practices for inventory
management. This can reduce errors due current assets respectively, can also be
to misunderstanding or lack of knowledge. distorted due to incorrect inventory figures.

Student’s Book Form Five
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