Accounting Best Practices, Fifth Edition

16–29. Eliminate All Paper from Inventory Transactions

Every time someone handles a piece of paper listing an inventory transaction, there is a chance of losing the paper, misconstruing its contents, or transcribing it back into the computer system with an error. This problem is especially prevalent in the handling of inventory, since there is a potential for a paper-based transaction at every step in the handling of inventory—receiving, quality assurance, putaway, moves, picking, scrap, shipping, and so on.

The best solution is the complete avoidance of paper documents for all inventory transactions. This can be done through best practices already noted—bar coding and radio frequency identification. As an example of how one can use these technologies to avoid paper-based transactions, one can use a bar-coded scanner to record the receipt of an incoming item, scan the bar code again when the item is put away, scan it yet again when picked, and scan it one last time upon either shipment or delivery to the shop floor. As an alternative to bar coding, a radio frequency identification system requires no scanning at all—a radio chip attached to each pallet, case, or item transmits its location to receiving stations as it moves about the company premises. These technologies have the added benefit of requiring much less or no employee labor, so they can concentrate on their primary tasks and have no opportunity to incorrectly record a transaction.

The downside of all these alternatives ...