Stock Audit for Manufacturing Unit

Stock audit for Manufacturing units is essential to keep correct inventory records of manufacturing and ensure operational efficiency. Manufacturing unit hubs play a significant role in the Indian economy with 17% of the nation's GDP and over 27.3 million workers. It is an integral and huge part of the economy. It involves processing and refining raw materials, such as ore, wood, and foodstuffs, into finished products, such as metal goods, furniture, and processed foods. It is necessary to conduct a regular stock audit for manufacturing units to reduce the business loss due to fraud or theft and find the error to improve the overall inventory management. Bizfoc is a leading stock auditor company in India who provides stock audit for manufacturing unit service with professional auditors at a reasonable price.

What is a Stock Audit for a Manufacturing Unit?

A stock audit is a comprehensive evaluation of a manufacturing unit inventory, accessing both the physical stock and the accuracy of inventory records. In the manufacturing industry, it is very essential to arrange a stock auditor to ensure accurate inventory management and identify any theft, damage or expired inventory. In the manufacturing industry there is a large amount of the raw material that is used to make a finished product, it’s become difficult to verify all the products due to its quantity. To get the proper data of the manufacturing product , the stock auditor helps you to evaluate the manufacturing units, analyze the data which are recorded and also smoothen the business operation.

Stock audit for Manufacturing Unit Applicability & Limit

Many MSMEs conduct Manufacturing unit audits due to management requirements rather than regulatory requirements. The manufacturing stock verification is carried out as prescribed under the Companies (Auditor's Report) Order, 2020, also known as CARO, 2020. The CARO, 2020 applies to the organizations below.

• Public Listed companies
• The Manufacturing audit applicability on private companies in case any of the following limits are satisfied:
  
  
  • Gross receipts or revenue is more than ₹ 10 crore in the financial year.
  • Paid-up share capital plus reserves is more than ₹ 1 crore
  • Holding or subsidiary of a Public listed company
  • Borrowings is more than ₹ 1 crore throughout the financial year

Stock audit for Manufacturing Unit Report Format

There is no standard format prescribed for the Manufacturing unit audit report. Every company can have their format depending on the purpose of the audit. The auditor's report is usually accompanied by an Excel sheet for conducting any further analysis by the company. The report typically contains the following information:

• Location code and name
• Date of stock audit
• Details of SKU
• Count of physical stock for each SKU
• Count of stock as per books of accounts for each SKU
• Variance between physical stock and books of account for each SKU
• Any remarks for the variation
• Signature of manufacturing unit incharge
• Signature of Stock auditor

Stock Audit for Manufacturing Unit Procedure

There is comprehensive guidance on the process of manufacturing unit audit which help to conduct the audit properly:

Step 1: Planning of audit

It is necessary to know the auditing scope, types of inventories, locations, and specific items to be audited. Manufacturing audit timeline must be set, considering the company’s function schedule.

Step 2: Conducting Physical Verification

To perform a physical count of the inventory stocks, one must use a systematic approach, like ABC analysis or cycle counting, to ensure comprehensive coverage, and discuss with the appropriate department for the counting process.

Step 3: Physical Inventory vs. Book Inventory

Compare the physical counts with the inventory, which is already recorded, write down the outcomes, investigate and reconcile irregularities, and document the reasons for variations post discussion with team on the ground.

Step 4: Report Preparation and Submission

Make a report of stock audit findings, which includes any irregularities, and suggestions for enhancement. To give a summary record to high-level management, highlight key outcomes, and recommend appropriate actions.

Stock Audit for Manufacturing Unit Checklist

Inventory audit checklist that is required to be followed for conducting an effective Manufacturing unit audit:

• Decide on scope of audit, time period and locations to be covered
• Gather required stock / SKUs details against which stock needs to be verified
• Recording the stock auditor team in and out time to the premises
• Recording the physical counts of stock / SKUs
• Ensure all stock / SKUs covered in the SKUs are covered
• Discuss and get the confirmation of the stock audit finding between unit in charge and stock auditor
• Present your findings along with any suggestions for improvement

Stock audit for Manufacturing Unit Fee in India

The fee for manufacturing audit services in India can vary depending on various factors such as the number of SKU, night audit, location, days required, and inventory complexity. The stock audit fee starts from ₹2,499 per day, which excludes out of pocket costs and varies with the stock audit scope.

Benefits of Stock audit for Manufacturing Unit

• Financial report development: Improving the existing inventory management, which leads to accurate financial reporting. Maintaining well stock ledger means presenting a correct financial condition in the business, and also helps to take better decision.
• Identifying and preventing fraudulent affairs: It helps to identify fraudulent affairs like misappropriation or theft of stock, and any discrepancies, which may affect business severely. It helps companies take necessary actions and prevent future occurrences or financial losses.
• Streamlining stock processes: The stock management must be efficient; thus, it leads to streamlining business operations. It shows the inefficiencies in the stock handling procedure and allows companies to optimize their process for better efficiency.
• Recognizing Overstock and Understock Situations: Overstocking ties up capital, while understocking can result in missed sales opportunities. Stock audits help in recognizing optimal stock levels, minimizing financial losses, and improving cash flow.

Challenges while conducting a Stock audit for Manufacturing Unit

Here are some common challenges faced by the textile and apparel industries:

• Complex Inventory System: Manufacturing unit has numerous raw materials, work-in -process and finished goods. So it becomes difficult to review all the items accurately. That's why it requires proper managing, auditing and detailed analysis.
• Physical Verification: Conducting a physical verification of stock can be a time taking process and labor intensive, especially in large manufacturing companies with extensive storage areas.
• Documentation and Records: In a stock audit process, it is important to maintain comprehensive and accurate documentation of stock movements, receipt, issuances, and adjustment as incomplete or incorrect records can lead to discrepancies during audit.
• Valuation Issue: Determining the accurate valuation of inventory can become challenging for doing stock due to fluctuation in raw material costs, overhead location, and method of valuation.

Bizfoc: Manufacturing Unit Audit Company in India

Bizfoc is a leading manufacturing unit stock audit service provider firm in India with a presence in pan India. The Bizfoc team has more than 10 years of experience in inventory audits, assisting companies like Apple, Toyota Group, Volkswagen Group and Samsung Electronics. Bizfoc provides best-in-class services at transparent pricing with a high degree of precision.

Conclusion

Stock audit helps you understand your company's financial condition. Conducting a regular stock audit for manufacturing units is essential to operate the business efficiently. Audit helps in rectifying the issues, ensure accurate valuation and maintain proper records of each raw material to finish good. If you are looking for a stock auditor for a manufacturing unit in your city then you must know all the process, benefits and fees of the audit. Stock audits not only protect your valuable assets but also foster stakeholder trust.Thus, a stock audit of Manufacturing unit helps improve the organization's profit and loss.

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