What is inventory?

The two most popular inventory methods today

Currently, the two most popular inventory methods are periodic inventory and regular declaration. Let's learn about the advantages and disadvantages of each method below.

Regular inventory

This is an inventory method that is performed regularly, either daily or weekly, depending on the type of item and the size of the warehouse. This method is often applied to businesses that produce high-value items such as electronic equipment, technology, and machinery.

Periodic inventory

The periodic inventory method is performed according to a specific cycle such as monthly, quarterly, or according to the needs of the business. This method is suitable for large businesses with many product codes and products of average value, helping to optimize the warehouse management process and save inventory costs.

Inventory not only helps businesses understand the inventory situation but also supports making reasonable business decisions, thereby improving business performance.

The most detailed inventory process 2025

Inventory is an important task that helps businesses accurately control the actual quantity of goods, thereby making timely adjustments to meet operational needs. Below is the inventory process including basic steps, ensuring accuracy and professionalism as follows:

Step 1: Build a detailed inventory table

The first step in the process is to build a detailed inventory table, based on data from the management software. The required information includes the name of the item, the actual quantity of goods, the quantity of goods in the report, and detailed notes.

Step 2: Conduct inventory and take notes and information table

The inventory person records the actual quantity of goods in the table. There should be two independent inventory people, each person records the data in a separate table to ensure objectivity and accuracy.

Step 3: Recheck the quantity of goods and compare with the report

After completing the inventory, compare the actual data with the report. If there is a difference, it is necessary to count again to ensure the most accurate. In case of discrepancies, the accountant and warehouse keeper need to investigate and explain.

Step 4: Adjust the report

If there is a discrepancy, the accountant will adjust the report based on the actual data. If there are no errors, this step can be skipped.

Step 5: Complete the inventory record and sign for confirmation

After completing the inventory, the inventory record must be signed by the relevant parties to be kept as evidence and avoid errors.

Step 6: Investigate the cause and handle errors

If errors are detected, the manager needs to investigate the cause and propose corrective measures. Some common errors include:

Excess difference: May be due to errors in reporting or forgetting to update when importing goods.

Short difference: May be due to employees forgetting to scan barcodes, loss in transportation, or theft or fraud.

A detailed inventory process helps businesses minimize errors, optimize warehouse management efficiency in 2024 and ensure accuracy in business operations.

>> Reference:  Smart warehouse model

How to calculate inventory turnover accurately

The formula for calculating inventory turnover ratio is as follows:

Inventory turnover ratio = Revenue / Average warehouse value

In which:

• Revenue: Will be equal to total revenue in the period
• Average inventory value: Will be calculated by the formula: (Inventory value at the beginning of the period + Inventory value at the end of the period) / 2
• For example: Your store's revenue in 2023 is 1,200,000,000 VND, the average inventory value is 50,000,000 VND.
• The inventory turnover ratio will be: 1,200,000,000 / 50,000,000 = 24

Thus, in 2023, your store has turned over its inventory 24 times. Next, take 365 days / 24 times = 15.2 days. That means on average, your store will complete 1 inventory turnover every 15.2 days. Based on this number, you can estimate the time when the goods are about to run out to have a suitable import plan.

Purpose of inventory

Inventory is an important factor to help businesses effectively manage their warehouses. Below are the main purposes of the inventory process:

• Monitoring the amount of goods in stock: Inventory helps businesses accurately determine the amount of goods in stock, thereby detecting and adjusting discrepancies (if any) between the report on the system and reality.
• Planning to import goods accurately, avoiding waste: Thanks to accurate inventory results, businesses can adjust the appropriate import budget, helping to avoid excess goods and effectively manage resources.
• Accurate profit reporting: Inaccurate inventory leads to discrepancies in reports on cost of sales, gross profit and net profit. Accurate inventory helps to accurately count data, ensuring that the profit report reflects reality.
• Preparing a Balance Sheet for Tax Season: Taking an inventory is an important step in preparing a balance sheet for tax filing, helping businesses easily complete tax requirements and better manage their finances.

Common Mistakes in Inventory Management

Although inventory helps businesses control inventory accurately, this process often has common mistakes that affect the results:

- Not preparing the warehouse space in advance: A common mistake is not ensuring that the space is large enough and neatly arranged, making it difficult to load and unload goods. Before taking inventory, it is necessary to ask questions to determine the space and arrange the goods appropriately:

• Is the space cleaned up?
• Are the products arranged correctly and easy to get?

- Lack of specialized human resources: Human resources are an important factor, directly affecting the inventory process. When there is a lack of experienced human resources, the inventory process is likely to encounter obstacles, leading to errors in handling and tracking goods.

- Lack of process supervision: The inventory process will not be effective without the necessary supervision. Businesses need to check from the beginning to ensure that all steps are performed correctly, minimizing risks.

- Not handling errors promptly: When errors arise during the inventory process, if not promptly resolved, the business may face risks, affecting business operations. Therefore, error handling needs to be done immediately.

- Not preparing for inventory destruction: Not planning and preparing inventory destruction procedures can cause businesses to incur unnecessary inventory costs, waste resources and reduce management efficiency.

A tight and accurate inventory inventory will help businesses optimize the warehouse management process and ensure efficient business operations.

Effective inventory inventory method

To help the inventory inventory process take place quickly and accurately, businesses should apply the following notes:

Inventory Classification

Business experts recommend that manufacturing businesses classify their inventory according to ABC groups. Group A includes high-value but low-quantity items; Group B is products with average prices; and Group C is low-priced, fast-selling items. This classification helps businesses easily prioritize inventory for high-value products, while reducing unnecessary storage costs.

Comprehensive tracking of product information

Recording complete details of each product in the warehouse, including SKU, barcode, batch number, origin, and supplier, helps businesses accurately control the quantity of goods. In addition, updating the cost of each item also helps businesses have appropriate adjustment plans when necessary.

Consistency in the inventory process

To avoid problems such as mismatched data or errors in the inventory process, businesses need to ensure that warehouse staff and goods receipt staff agree on the working process. Having a consistent process not only minimizes errors but also helps the work run smoothly and improves efficiency.

Applying warehouse management technology

Applying smart warehouse management software to the inventory process is an effective solution to help businesses save time and ensure higher accuracy. Compared to traditional methods such as Excel spreadsheets or notebooks, modern warehouse management software easily integrates and processes data in the 4.0 era.

Before choosing management software, businesses need to carefully evaluate to choose the solution that best suits their actual needs. Warehouse management software not only helps optimize inventory but also helps businesses capture information in real time, helping to make better management decisions.

Applying the above methods will help businesses optimize the inventory process, minimize errors and improve management efficiency. To manage and control inventory effectively, contact Intech Group - Vietnam's leading provider of automated warehouse solutions, with a team of enthusiastic and experienced consultants who will solve the problems your business is facing.

See more:

• What is inventory turnover?

• Warehouse management process - Effective warehouse management steps