Stock audit checklist for manufacturers

Before the audit

• Reconcile the stock statement you submitted to the bank with your books.
• Make sure closing stock in the books matches stock records by category.
• Prepare a count plan: who counts which area, and when.
• Gather purchase bills, production records and sales records for the period.
• Decide how to handle goods held by third parties and goods in transit.

During physical verification

• Count by category and compare with the records, item by item.
• Separate usable, slow-moving and obsolete stock.
• Check that stock is labelled and stored where the records say it is.
• Record stock held at other locations or with job workers.
• Check that stock is insured as the bank requires.

Valuation and ageing

• State the valuation basis and apply it consistently.
• Review ageing, so old stock is not carried at full value.
• Check that work in progress and finished goods are costed from your bill of materials and production records.

After the audit

• Reconcile differences between count and records, and write down the cause of each.
• Correct the books where the count is right.
• Keep the count sheets and the explanations with the stock statement.
• Fix the process that caused the difference, not only the figure.

Where an ERP helps

An ERP keeps a stock ledger of every receipt, issue and transfer, so book stock is traceable to documents. ERPNext has a stock reconciliation function that records a physical count against book stock and posts the difference.

Frequently asked questions