Human errors are the source of many inventory valuation issues, making it more troublesome for retail officers to certify financial results with confidence. A study by AMR Research in 2004 showed that 15% of retail loss was due to administration errors.
Human errors can never be totally eliminated, but a powerful retail solution contains features that reduce the likelihood and impact of data entry errors:
- Price and cost information is entered into documents automatically, based on predefined values.
- The creation and editing of documents that impact inventory is controlled by employee security. This ensures that only employees deemed trustworthy have the ability to adjust inventory values.
- Any unusual cost or quantity changes, such as those resulting from data entry errors, are identified so retailers can take steps to correct the mistakes.
Returned items and their values are another source of inventory valuation problems. A retailer and vendor may sharply disagree about whether or not items can be returned and the value to assign those items. Thus, to gain a clear picture of inventory values, retailers must reconcile any such disagreements. The best way to do this is to agree with the vendor ahead of time about what to do if items are damaged or defective. These terms should be captured in the retail management system used by businesses.
Invoice matching is another important procedure. Retailers need to make sure what is ordered matches what is received. This process can be improved by using a system that captures all the data needed to verify the PO against the shipment. For ultimate security, a retail management system should allow more than one level of approval before inventory is updated.Check out the full whitepaper “Retailers’ guide to financials: how to comply and thrive” for more tips on preventing errors in retailers’ financial reports.