Finished Goods Inventory (Alberta Council)

From SJA

THIS IS A DRAFT POLICY.

Contents 1 The Need 2 Policy 2.1 Purpose 2.2 Scope 2.3 Responsibility 2.4 Definitions 3 References and Related Statements of Policy and Procedure 4 Procedures 4.1 Security of Inventory 4.2 Product Authorization 4.3 Perpetual Inventory - In 4.4 Perpetual Inventory - Out 4.5 Returns to Finished Goods Inventory 4.6 Minimum/Maximum Order Quantities 5 Attachments

The Need

Inventory is an important and sizable asset to many companies. A relatively small error (loss, waste, or theft) in inventory may have a significant effect on net income.

Control of inventory requires both physical security ("existence"), as well as the maintenance of adequate accounting records ("valuation").

Policy

Additions to and withdrawals from finished goods inventory shall be controlled. Minimum/Maximum order quantities will be set up for each location by the Provincial Finance Department based from historical data. Changes to minimum/maximum order quantities must be authorized by the Finance Manager.

Finished goods inventory shall be physically secure and accurately recorded.

Inventory is not to be removed or added unless proper documentation has been completed. Inventory may be removed by the following methods:

• Resale - when inventory is sold the sale will be recorded in the Unity point of sale system thereby removing it from inventory. If a customer returns an item to be added back into inventory the return will be recorded in the Unity point of sale system.
• Weekly Inventory Order Requisition - A Weekly Inventory Order Requisition form is required to be completed on a weekly basis and submitted to Provincial Stores to replenish inventory items in the training centres. Once the orders have been approved and packed the Provincial Stores Coordinator will record the inventory transfer in the Great Plains financial system.
• Inventory Requisition (Stock Transfers) - Inventory Requisition forms have been created to replace stock transfers. Inventory Requisition forms are required to be completed and approved prior to inventory being removed from stores for purposes including: transfers between locations, building maintenance, promotional expenses, marketing, training, etc. Once the appropriate approval has been received the Stores Customer Service Representatives/Provincial Stores Coordinator will remove the product from inventory. These items are required to be included on the Inventory Summary Report.
• Daily Inventory Summary - This document is required to be completed at the end of each day and emailed to the Provincial Stores Coordinator for daily data entry into the Great Plains financial system. Items additions and withdrawals to be recorded includes books removed from inventory for in-house classes, inventory items removed with authorization from Inventory Requisition forms, and write offs.

Purpose

The purpose of this Statement of Policy and Procedure is to establish internal controls over finished goods inventory.

Scope

This policy applies to all employees.

Responsibility

The Provincial Stores department is responsible for ensuring that:

• Training centre orders for finished goods are processed only upon approval.
• Inventory Requisitions are forwarded for approval and returned to the requestor in a timely manner
• Recording additions to and withdrawals from inventory for all locations in Great Plains on a daily basis
• Retaining back up documents for audit purposes
• Provincial Finance is provided with information regarding quality concerns of returned products and corresponding with the supplier in a timely manner.

The Stores Department in each training centre is responsible for ensuring that:

• In-house requisitions and customer orders from finished goods are processed.
• Retaining back up documents for audit purposes
• Submitting an Daily Inventory Summaries to the Provnicial Stores Coordinator on a daily basis record additions to and withdrawals from inventory

Definitions

• "Perpetual inventory" means a way of maintaining records that track, in real time, the movement of materials into and out of inventory so that at any time, accurate quantities of inventory on hand may be obtained from the records.

• "First-In, First-Out (FIFO)" means additions to inventory can happen at different times and with different costs. The FIFO approach to inventory assumes that withdrawals from inventory come from the oldest stock on hand.

References and Related Statements of Policy and Procedure

• Inventory Count (Alberta Council)
• Inventory Requisitions (Alberta Council)

Procedures

Security of Inventory

1. Inventory shall be kept in a secure location that is to be locked at all times.
2. Employees shall access finished goods inventory only through the Stores Customer Service Representative or Administrative Coordinator in each location once an Inventory Order Requisition has been completed and approved by the appropriate manager.
3. The Inventory Requisition must be signed by the individual requesting inventory, the appropriate signing authority, and the Stores Customer Service Representative (or designate in their absence). The Stores Customer Service Representative signature verifies that the inventory has been removed and the signature of the individual requesting the inventory verifies they have received the order as requested.

Product Authorization

All additions to and withdrawals from inventory must be approved by the appropriate signing authority. This includes weekly inventory orders, inventory requisitions, new products to be added to inventory, and Inventory Summary Reports.

1. New Products: The Provincial Finance Department shall authorize additions to the finished goods inventory after completing quality, volume, and pricing verification.
2. Inventory Requisitions: When processing Inventory Requisitions, the Provincial Stores Coordinator will receive the initial inventory requisition forwarding it to the appopriate manager for approval. Once the manager has sent it back to the Provincial Stores Coordinator it will then be returned to the requestor for completion by the Stores Customer Service Representive (or desingate).
3. Weekly Inventory Order Requisitions: When processing Weekly Inventory Order Requisitions the Provincial Stores Coordinator will receive the initial request. The Provincial Stores Coordinator will review the quantities requested and make any notes regarding quantities that need to be changed due to packaging. Once the quantities have been reviewed the weekly order will be forwarded to the Finance Manager for approval. Once approved the Provincial Stores Coordinator will pack the orders, making withdrawals from provincial stores finished goods inventory where availabe and order products from suppliers if not in stock, and courier the packed orders to the requesting locations.
   1. Once training centre requisitions are processed and the order is received in the training centre stores department, each Stores Customer Service Representative is responsible for verifying the product and quantity shipped against the Inventory Requisition.
   2. Any discrepancies must be reported immediately to Provincial Stores.
4. Daily Inventory Summary : The Daily Inventory Summary will be emailed by the end of each day to the Provincial Stores Coordinator. The Provincial Stores Coordinator will data enter the information into the Great Plains financial system and forward the batch to the Finance Manager for approval and posting on a daily basis.

Perpetual Inventory - In

Provincial Stores shall record additions to finished goods inventory by recording:

• Date added
• Product number and description of product
• Training Centre location
• Quantity received
• Purpose/Description (ex. stock)

Perpetual Inventory - Out

Provincial Stores shall record withdrawals from finished goods inventory by recording:

• Date order filled
• Product number and description
• Training Centre location
• Quantity shipped/removed
• Purpose/Description (ex. stock, tradeshow)

Withdrawals from finished goods inventory shall be recorded on a FIFO basis.

Returns to Finished Goods Inventory

For products that have been returned by a customer for quality reasons, Provincial Stores will communicate with the other locations to determine whether there is a quality problem with the shipment.

• If a quality problem is identified, Provincial Stores along with Provincial Finance will request the shipment be replaced and the defective products returned.
• If a quality problem is not identified, the product will be recorded on an Inventory Order Requisition as a write-off.
• For products that have been returned from a customer for other reasons than quality, if the returned item is usable, the item will be returned into finished goods for resale.

Minimum/Maximum Order Quantities

Minimum/maximum order quantities will be set up by the Provincial Finance Department based from historical information.

Attachments

• Weekly Inventory Order Requisition
• Inventory Requisitions (Stock Transfers)
• Inventory Summary Report