Purchasing & Inventory Procedures
Running an inventory in a business can be a large task, as the inventory manager must control the traffic in the inventory, conduct purchases and ensure the overall value of the inventory is balanced. This is because a company's inventory is considered an asset and can therefore severely affect the overall worth of the business if it is not maintained. Purchasing and inventory procedures can help improve the operations of the inventory and maintain a positive net value.
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Inventory Procedures
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Inventory procedures are often called inventory control procedures, as they include controlling and maintaining the products or items stored on the inventory premises. Inventory procedures can include doing manual counts of stock quarterly or biannually and writing detailed reports about changes in the inventory status for business executives. A single inventory manager is often hired to handle all incoming and outgoing inventory traffic.
Purchasing Procedures
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Purchasing items to stock the inventory must only be done where there is a need. Some company executives will provide a figure that represents the lowest amount of stock allowed to be in the inventory at any given time. This means that when an item reaches this limit, the inventory manager must place an order to restock the inventory. The purchase must be done to refill the needed item plus restock any items that may currently be in demand or are selling faster than others.
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Overstock Inventory
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Overstocking the inventory by placing large orders can become an issue in terms of the safety of employees going through the inventory on a daily basis. Overstocking the inventory is essentially buying more products than are required to be ready for an increase in sales or production. Although overstocking may increase the overall asset value of the inventory for a temporary period of time, it can quickly become a liability or waste if the products are not used before expiration or while they are demand.
Importance of Purchase Control
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Controlling inventory purchases is important for two reasons. The first reason is the company's budget. The available amount of inventory purchases may not handle large orders that go beyond the common spending limit. Purchasing a large order with the goal of overstocking the inventory can throw the company's budget off balance, especially if it is not planned or discussed with business executives. The second reason purchase control is important is the expiry dates on the products. Buying too many products with expiry dates for the inventory can end up as waste and liabilities if they are not sold before they expire.
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