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Accounting Best Practices, Fifth Edition by Steven M. Bragg Englewood, Colorado

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16–19. Lock Down the Warehouse Area

The single most important cause of inventory inaccuracy is parts “walking out of the warehouse.” This means that the physical layout of the warehouse allows anyone to wander in and take any parts they need for the production process. When this happens, there is no record that any item was taken from stock, so no one knows what is left on the shelf, or even if there is anything left, which renders any automated reordering system useless. From the accountant’s perspective, the physical inventory count will probably be significantly different from what the accounting records show, resulting in a large negative inventory variance at the end of the year.

These problems can be eliminated by segregating the warehouse. This is done by setting up a fence around the entire storage area and locking the gate when there are no warehouse personnel on hand. In addition, there must be ironclad rules about who has a key to this gate. If too many keys are handed out, anyone will still be able to enter the warehouse after hours. To prevent this, there should be no more than one key given to the production personnel, and then only to the most responsible person, who will faithfully mark down anything taken from the warehouse. If possible, even this should be avoided by prepositioning any needed parts outside of the warehouse for use by the production staff when the ...

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