Cycle Counting & Inventory Audits
Inventory Control Procedures
Objective
To ensure that all inventory records remain accurate through structured cycle counts and audits, identifying stock discrepancies early and ensuring compliance with financial and operational controls.
All cycle counts must be recorded in the ERP system as a Stock Adjustment (STADJ) entry, including all necessary supporting data for future tracking.
6.1 Annual Cycle Count
The Annual Cycle Count is a full inventory check conducted once per year to verify system accuracy across all materials.
Committee Structure
The Annual Cycle Count Committee must include:
Committee Leader – Inventory Team Leader.
Project Accountant – Ensures financial validation of stock values.
Project Logistic Coordinator – Validates physical movement of materials.
Project Engineer – Assigned by the Project Manager to provide technical expertise.
Procedure
The Inventory Manager schedules the annual cycle count and notifies all stakeholders.
The Committee Leader coordinates the count and assigns roles to each member.
Warehouse operations are paused during the count.
The Storekeeper conducts the physical count, verifying:
Stock quantities.
Condition of materials (damaged, expired, excess).
Any unauthorized material movements.
Any discrepancies are documented and recorded in the ERP system as a Stock Adjustment (STADJ) entry.
Mandatory ERP Fields for Annual Cycle Count Record:
Stock Adjustment Type: Annual Cycle Count.
Counted Quantity vs. System Quantity.
Variance Explanation (e.g., loss, misplacement, data entry error).
Corrective Actions Taken.
The Project Manager must sign the final report before it is submitted.
The Inventory Manager is informed via official email.
Results are discussed in the Weekly Inventory Meeting.
Approval Process
The Project Manager's signature is mandatory before finalizing the Annual Cycle Count Report.
The Inventory Manager verifies ERP adjustments before implementation.
6.2 Quarterly (Q) Cycle Count
The Quarterly Cycle Count is an unannounced, random inventory verification performed at different project sites.
Key Rules for Quarterly Counts
The Inventory Manager selects the count date.
No prior notification is given to warehouse staff.
The Inventory Team Leader coordinates with the Inventory Manager to execute the count.
Procedure
The Inventory Manager assigns the Team Leader to initiate the cycle count.
The Team Leader selects a random set of stock items for verification.
The Storekeeper physically counts the items and records the findings.
Any discrepancies are immediately investigated.
System Record (ERP Stock Adjustment - STADJ)
Stock Adjustment Type: Quarterly Cycle Count.
Items Selected for Count.
Variance Percentage (if any).
Root Cause Analysis & Comments.
The report is signed by:
Committee Leader.
Inventory Manager.
Project Manager.
6.3 Diesel Cycle Count (Monthly)
The Monthly Diesel Cycle Count ensures that fuel stock levels are accurate and match system records.
Committee Structure
Storekeeper – Conducts the physical fuel count.
Project Logistic Coordinator – Verifies stock entries and movement logs.
Project Accountant – Ensures financial alignment with usage records.
Procedure
The Storekeeper manually counts diesel stock and enters the figures in the ERP system.
The Project Logistic Coordinator validates the counted quantity.
The Project Accountant checks diesel usage trends to detect any anomalies.
The results are recorded in the ERP system as a Stock Adjustment (STADJ).
Mandatory ERP Fields for Diesel Cycle Count Record:
Stock Adjustment Type: Diesel Cycle Count.
Beginning Diesel Stock vs. Actual Count.
Variance (if any) and Explanation.
Corrective Measures Taken.
The Project Manager signs the final report, and the Inventory Manager is informed via email.
6.4 Reporting & Documentation
All cycle counts must follow the official company template, and each report must be:
Digitally recorded in the ERP system with a Stock Adjustment entry.
Signed by all committee members.
Approved by the Project Manager.
Submitted to the Inventory Manager for review.
Discussed in the Weekly Inventory Meeting for transparency.
Required ERP System Record for All Cycle Counts
Field Name
Description
Stock Adjustment Type
Annual, Quarterly, or Diesel Cycle Count.
Counted Quantity
Physical stock count value.
System Quantity
ERP system-recorded stock.
Variance
Difference between physical and system values.
Variance Percentage
% deviation from system record.
Root Cause
Possible reason for variance (loss, incorrect entry, etc.).
Corrective Actions
Actions taken to resolve discrepancy.
6.5 Case Scenario: Resolving an Unexpected Stock Variance
Scenario
During a Quarterly (Q) Cycle Count, a stock variance of 40 missing copper cables is discovered, with no prior recorded issuance.
Actions Taken
✅ DO:
Storekeeper stops the count and immediately reports the discrepancy.
Inventory Supervisor reviews past transactions to locate unrecorded movements.
Inventory Manager investigates missing stock by checking transfer logs.
Stock Adjustment (STADJ) entry is created in ERP to adjust stock balance.
Final report is signed by all committee members and submitted to the Project Manager.
❌ DON’T:
Adjust stock in the system without identifying the cause.
Assume the missing stock is an ERP error without verification.
Ignore the issue without informing the Inventory Manager.
Proceed with stock adjustments without proper approval.
Responsibilities
Role
Key Responsibilities
Inventory Manager
Approves cycle count scheduling and final adjustments in the ERP system.
Inventory Supervisor
Monitors cycle count execution and investigates discrepancies.
Inventory Team Leader
Leads cycle count operations and submits reports.
Storekeeper
Conducts physical stock counts and records findings.
Project Accountant
Validates financial implications of stock adjustments.
Project Logistic Coordinator
Assists in verification and documentation of stock movement.
Project Manager
Approves final reports for cycle counts before adjustments are finalized.
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