How to conduct a professional inventory report

An inventory report is an important task for businesses since it allows them to fulfill their legal obligations and accounting requirements (stock valuation). In Morocco, as per Article 5 of Law of Accounting No. 88-9 o, a company is expected to undertake inventory report at least once every year. In this regard, we identified in this article a professional approach to everything related to the inventory process.

Pre-Inventory Phase

Effective planning ensures effective annual inventory. Hence, follow these steps before the actual stock counting begins:

Before inventory: Document procedures

The process of conducting the counting of remaining items in stock and inventory taking itself should be presented with your team in a comprehensible way.

• Conduct a team meeting to explain the processes in detail and clarify issues if any .
• Appoint your counting team members.
• Define the responsibilities of each team members.

Put the warehouse manager out of the counting process; he/she may serve in that role as a supervisor only.

Organize Stock

Place items and materials in order with labels and references on them.

Use custom labels for:

• Past due items.
• Items belonging to other companies.
• Items measured in volume and weight.
• Use an accurate system for inventory management.
• Restrict manually made changes in your inventory management system.

During Inventory

During counting, inventory report plan should allocate time (depending on your warehouse volume) to ensure the process is carried out accurately. The best practices to follow are:

• Minimize the movements of the stock to be counted (any process responsible of stock impact should be halted) in order to minimise the occurrences of errors.
• Assign specific zones: Create some zones in the warehouse and assign them to certain counting teams.
• Mark counted items: Either with a label or with some kind of caption, all counted items should be marked to prevent counting the same items again.
• Control team oversight: A team whose purpose would be to verify counts through random checks.

Post-Inventory phase

Once the physical count has been conducted, explain all the documents that follow:

• Collect and verify data: For all counting sheets, all should be obtained, cross checked and verified.
• Create an inventory report: A report should be prepared describing all the quantity numbers in inventory (this is where items only have reference and remaining quantity).
• It should be stamped with signatures from people leading the team as evidence of accountability and other details that may be necessary.
• Reconcile discrepancies: Check all permanent records of inventory against the physical count.
• Check if there were any such differences and then explain the differences.

Valuation and accounting

Send the final report including the last results to the accounts so as to evaluate the report and make the relevant journal postings.

A note on small businesses

While large companies often adhere to these professional procedures, smaller businesses may approach inventory informally, focusing primarily on quantity adjustment and stock valuation based on remaining quantity and price value of each. However, proper counting and valuation are essential for accurate financial reporting and should not be overlooked.

By maintaining organization and control throughout the inventory process, businesses can ensure compliance with accounting requirements and achieve an accurate final count. This professional approach not only meets legal standards but also enhances operational efficiency and decision-making.