JOINT AID MANAGEMENT (JAM)

GUIDANCE ON STOCKTAKING /PHYSICAL INVENTORY

Introduction

1. Accurate stock figures are a key aspect of assessing and reporting JAM’s financial performance.
Stock takes are undertaken at periodic intervals during the year and at the end of the financial
year, to determine the levels and values of stocks held by JAM. Year end stock count helps to
determine existence, valuation, completeness and rights and obligations of the stock held.

Purpose of this procedure

2. This document provides detailed guidance as to how a stock take should be undertaken. The
guidance also confirms the procedures that are required to be undertaken before and
immediately after the stock take as well as during the stock take itself.

Scope

3. This procedure provides guidance to managers responsible for stock take and staff undertaking
stock takes

Definitions /Glossary

4. Stocktaking is the action or process of recording the amount of consumables held by JAM. This
includes a physical count of the numbers of items held which are then valued for accounting
purposes.

Ownership and Responsibilities

1.1.Role of the Warehouse Managers

Line managers are responsible for ensuring that:

 All staff are aware of the requirements for stocktaking;

 Stocktaking is completed within the relevant timescale as may be required by JAM taking
advice from relevant Finance Managers; and

 Staff is allowed the necessary time to complete stocktaking in accordance with the set
timescales.

1.2 Role of Individual Staff

 All staff members are responsible for complying with the requirements of stock taking as
outlined within this guidance. If any aspect is unclear they must bring this to the attention
of their immediate line manager.
Standards and Practice

Reasons for undertaking a stock take

Stock taking is carried out for the following purposes:

 To verify the accuracy of stocks records

 To support the value of stock shown in the balance sheet through physical verification

 To disclose the possibility of fraud , theft or loss

 To reveal any weakness within the system for the custody and control of stock;

 To identify obsolete or damaged stock; and

 To ensure that all stocks are located and properly accounted for;

It is very vital that a physical check of stocks held, covering all items in store, must be undertaken at
least once a year. For the purpose of the financial statements, this must take place at the end of the
financial year (31 December).

In addition the CFO may request that a stock take be carried out at any point to ensure that the
management accounts show an accurate position. This will be communicated through Finance
Managers who should liaise with those individuals responsible for stock takes.

Where stock takes are undertaken for purposes other than the financial statements, they should still be
undertaken in accordance with these guidelines.

Stock taking Procedures

The Financial Controller (or delegated Finance officer) will ensure that the requirement for a year end
stock take is communicated well in advance to departmental managers, ensuring that the managers can
make arrangements for staff to be available for the count.

Stock taking and subsequent valuation must take place at the end of each financial year in order to
provide JAM with an accurate stock valuation to be included in JAM’S financial statements. Stock takes
should therefore be carried out as near to 31 st December as possible. Where the yearend count does not
take place on the 31 December, records of stock deliveries and issues between the date of the count
and the 31 December should be maintained to enable the stock value to be adjusted to the position as
at 31 December.

Stock taking is the responsibility of the appropriate manager but various independent checks can be
made by internal or external auditors or members of the Finance Department. JAM’S external auditors
will attend a sample of the year end stock counts to ensure these procedures are being adhered to in
full.
Prior to starting the stock take

 Appoint one person to control whole operation.

 Confirmation of stock take date and time communicated to all stakeholders ( including external
auditors)

 Identify staff to participate in the stock take including ensuring that where appropriate staff is
available to supervise the physical inventory count and follow up of any variances.

 Issue all stakeholders with detailed written instructions for stock take well in advance of stock
take date; also follow up with verbal instructions to ensure they know what is required including
follow up procedures for resolving variances. A meeting of all persons involved in the counts
should be held prior to the stock taking to review instructions and answer questions.

 Teams of two must be made available to undertake the stock take and they should remain in
one another’s presence throughout the count. One of the team should be independent of the
day to day operation of the stockholding.

 One person must be made responsible for the overall stock take.

 A list of stock currently held should be drawn up –this may be derived from existing local stock
records or in some cases may be created from a list of items ordered through JAM’s
procurement system

 A sufficient number of teams should be selected and briefed to undertake the stock take within
the designated time.

 Allocate areas to be counted to individuals or teams of counters to ensure that a systematic

 Organise stock for efficient counting. Like items should be grouped together. Goods that are to
be excluded should be marked and located away from inventory.

 No stock should be received or issued into store whilst the stock take is in progress. A record of
the most recent delivery to stock and most recent issue from stock should be noted and
retained with the record of the stock take.

 If stock in transit does exist ensure details are provided to external auditors so that confirmation
can be obtained.

 Third party owned (consignment) stocks not owned by JAM should be clearly identified and
excluded from the count.

 The stock sheets used to record the details of the stock take should record the location ,
description (narrative and commodity number), stock balance, unit of issue, price per unit ,
number of units held and total stock valued for each item.

 The stock sheets must be numerically controlled (1of 10, 2 of 10 etc) so that all sheets used are
accounted for.
During the stock take

 Inventory cut off to be reviewed prior to stock take commencement.

 Arrange for operations to be halted to cease movement of inventory during count.

 Each item of stock should be physically counted and the details reported on the stock sheet.
One person should count the items whilst the other member of the team records the count.
 Counts sheets written in pen rather than pencil
 Sequentially numbered count sheets and a sequence checks performed once the count is
complete.

 Where necessary, label each area to evidence that it has been counted.

 Damaged goods or obsolescent items should not be recorded, but removed to a separate
location. A review of such items should be made at the conclusion of the stock take and
reported to the departmental manager for any authorization of write-off to be made. Stock
sheets should then be amended as appropriate to reflect any changes and these should be
certified by the manager.

 Investigate any variance by re-counting where necessary.

 Ensure count is appropriately supervised throughout by an independent staff member.

After the stock take

 At the conclusion of the stock take, each stock sheet must be signed by the staff undertaking the
count.

 The person who is taking the lead responsibility on the count should ensure that all areas have
been counted and review the sheets for errors and or omissions.

 The stock listed on the stock sheet must be priced. Where possible, the price entered on the
stock sheet should relate to the price at which the item was originally purchased and not the
current cost of replacing the item. However, where changes in values are not significant,
financial reporting regulations permit the use of the current purchase cost.

 Stocks should also be priced in the units at which the stock was bought, e.g. if stock is bought in
packets of ten, then the units should be counted and valued as packets of ten.

 Once priced, completed stock sheets (appropriately signed) should be returned to the Finance
Department by the required date; and a copy should be kept by the warehouse manager.

 A stock certificate, confirming the total value of stocks will be prepared by Finance Department
and must be signed by the manager responsible for the stock, before it is Financial Controller.

Manual Records

 Manual records should be updated with the results of the stock take.

 Stock take lists must be kept for 18 months as proof of the stock take.
 Approved:

Global Chief Finance Officer