Five inventory controls could protect your company against inventory fraud and theft
At the end of the year, you'll have stock you purchased but haven't sold yet. You need to record this inventory stock on your financial statements.
Because you'll sell the stock and get money for it, your stock is an asset. You calculate it value by taking the quantity of goods you have at year end and multiply it by the cost.
Unfortunately, because of this process, there's a massive inventory fraud threat. This is because someone can easily take some of the stock and quickly turn it into cash.
All they have to do is pinch the stock, change the numbers during stock take and sell off what they stole. You'll have no way to track the missing inventory.
That's why I'm going to show you five simple controls you can implement today to protect your company against inventory fraud and stop employees stealing...
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Implement these controls to stop inventory fraud and theft in your company
1. When you get goods into your warehouse, the warehouse manager must sign for them on a 'Goods Received Note'.
2. He must use this note to sign the goods into the warehouse.
3. Restrict access to your storeroom. This means employees can't take goods from the stores unless they have an approved 'Release Slip'.
4. Put security measures in place such as cameras or security guards.
5. You need control measures around the inventory as it moves through the production process.
a) Once the warehouse manager signs goods into the warehouse it must go to the storeroom.
b) In production, he will sign it into raw materials when he signs it into the warehouse.
c) During the manufacturing process, staff will need raw materials to work with. They must sign these raw materials out of 'Raw Materials' and into 'Production'.
d) Use an 'Inventory Movement Slip' (IMS) to track this movement in and out of different manufacturing stages.
e) The employees in charge of 'Raw Materials' must prepare an IMS for the amount of raw materials the production team needs.
f) Both the 'Raw Materials' and 'Production' staff must sign the IMS to prove the goods left the 'Raw Materials' area and moved to 'Production'.
g) Employees must use IMSs to move the goods from one phase of production to the next. They must create a new IMS each time, and both 'departments' sign for the release and the receipt of goods.
h) This makes sure employees take responsibility for the goods they're working with. It isolates the area where the goods should be. This makes it easier to trace the movement of inventory and find out where it went missing.
There are still more controls you should put in place to stop inventory fraud and theft in your company. You can find them in The Essential Fraud-Proof Business Guide
. You can also find nine other types of fraud and how to stop them in the Guide.
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