Page 337 - Accounting Best Practices

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Exhibit 16.1 Summary of Inventory Best Practices Inventory Best Practices
Best Practice Cost Install Time
Bill of Material Accuracy
16–1 Audit bills of material
16–2 Modify the bills of material based on
actual scrap levels
16–3 Review inventory returned to the warehouse
Efficiency Issues
16–4 Compare open purchase orders to current
requirements
16–5 Eliminate the receiving function
16–6 Eliminate the warehouse
16–7 Shift raw materials ownership to suppliers

Inventory Accuracy
16–8 Audit all inventory transactions
16–9 Compare recorded inventory activity to
on-hand inventories
16–10 Eliminate the physical count process
16–11 Lock down the warehouse area
16–12 Move inventory to floor stock
16–13 Segregate customer-owned inventory
16–14 Streamline the physical count process
16–15 Track inventory accuracy
16–16 Train the warehouse and accounting staffs
in inventory procedures
16–17 Verify that all receipts are entered in the
computer at once

A few best practices require the installation of fencing or different bin systems,
but even these expenses are not considerable, unless the warehouse in question is
a very large one. The remainder of this chapter separately discusses each of the
best practices shown in Exhibit 16.1.