Inventory Policy and Procedures

Inventory Policy and Procedures
1. Purpose
The purpose of this policy is to establish guidelines for the management, control,
and accountability of inventory items. It outlines the responsibilities of staff in
handling, recording, and safeguarding inventory.
2. Scope
This policy applies to all employees involved in the purchasing, receiving, storing,
and managing of inventory within the organization.
3. Definitions
 Inventory: Goods, materials, or supplies held by the organization for the
purpose of sale, production, or operational use.
 Inventory Custodian: An employee responsible for overseeing the
inventory, including maintaining records and monitoring stock levels.
 Stock Reorder Level: The minimum quantity of an inventory item that
triggers a reorder to ensure that stock does not run out.
 Stock Reconciliation: The process of comparing physical inventory counts
with inventory records.
4. Responsibilities
4.1 Inventory Custodian
 Maintain accurate records of all inventory items.
 Monitor stock levels and ensure items are replenished as necessary.
 Conduct regular stock counts and reconciliations.
 Ensure that inventory items are stored securely and properly.
4.2 Purchasing Department
 Approve and process purchase orders for inventory items.
 Coordinate with suppliers to ensure timely delivery of inventory.
4.3 Finance/Accounting Department
 Record inventory-related transactions in the financial system.
 Review and approve inventory reports and reconciliations.
 Conduct audits to ensure proper inventory management.
5. Policy
5.1 Inventory Classification
Inventory will be classified into the following categories:
 Raw Materials: Items used in the production of goods.
 Work-in-Progress (WIP): Partially finished goods that are in the production
process.
 Finished Goods: Products that are ready for sale.
 Consumables: Supplies used in the organization’s operations but not for
sale (e.g., packaging materials).
5.2 Stock Levels
 Stock Reorder Level: The minimum stock level for each inventory item
must be established to prevent stockouts.
 Maximum Stock Level: To prevent overstocking and excess holding costs,
maximum stock levels should be defined.
5.3 Inventory Valuation
 Inventory should be valued using an appropriate costing method (e.g., FIFO -
First-In, First-Out or LIFO - Last-In, First-Out), as determined by management.
 The chosen method must be consistently applied.
5.4 Stock Replenishment
 Inventory must be replenished when stock levels fall below the reorder point.
 All purchase orders for inventory must be authorized by the Purchasing
Department.
6. Procedures
6.1 Receiving Inventory
1. Upon delivery, the Inventory Custodian verifies that the items received match
the purchase order and delivery note.
2. Any discrepancies (e.g., damaged goods, incorrect quantities) are noted and
reported to the Purchasing Department immediately.
3. Once verified, the Inventory Custodian records the items into the inventory
system and updates stock levels.
4. Items are then stored in the appropriate location following inventory storage
guidelines.
6.2 Stock Issuance
1. Requests for inventory items must be approved by the relevant department
head or manager.
2. The Inventory Custodian records the issuance of stock in the inventory
system, ensuring that the stock levels are updated in real-time.
3. All issued items must be documented and tracked to prevent misuse.
6.3 Stock Reconciliation
1. Physical inventory counts must be conducted periodically (e.g., monthly,
quarterly, or annually) depending on the nature and volume of inventory.
2. The physical stock is compared with the inventory records to ensure
accuracy.
3. Any discrepancies must be investigated and resolved promptly, and
appropriate adjustments are made in the system.
4. A Stock Reconciliation Report must be prepared and submitted to the
Finance/Accounting Department for review.
6.4 Inventory Adjustments
1. If discrepancies are found during stock reconciliation, the Inventory Custodian
must document the differences and prepare a justification.
2. Adjustments to the inventory records must be approved by management
before they are recorded in the system.
6.5 Security and Storage
1. All inventory items must be stored in designated areas to prevent loss or
damage.
2. Access to inventory storage areas is restricted to authorized personnel only.
3. Security measures, such as locks, surveillance cameras, and inventory control
systems, must be implemented to safeguard inventory from theft or damage.
6.6 Inventory Disposal
1. Damaged, obsolete, or surplus inventory must be reported to management
for evaluation.
2. Disposal of inventory must be approved by management, and a Disposal
Report must be prepared and submitted.
3. The Inventory Custodian is responsible for updating the inventory system to
reflect the disposal.
7. Reporting
 Monthly inventory reports must be submitted to the Finance/Accounting
Department, detailing stock levels, stock movements, and any adjustments
made.
 The Inventory Custodian must ensure timely and accurate reporting of all
inventory-related activities.
8. Audit and Review
 The Finance/Accounting Department will conduct periodic audits of inventory
records to ensure compliance with this policy.
 Any irregularities discovered during audits must be addressed immediately,
and corrective actions must be taken.
9. Exceptions
 Any exceptions to this policy must be authorized by [insert appropriate
authority].
10. Policy Review
 This policy will be reviewed annually by management to ensure that it is up
to date and effective.

Inventory Policy and Procedures

Uploaded by

Copyright:

Available Formats

Inventory Policy and Procedures

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Inventory Policy and Procedures

Uploaded by

Copyright:

Available Formats

Inventory Policy and Procedures

You might also like