Warehouse Audit: Checklist, Procedure, and Fees

Warehouse audits are gaining importance with the increase in the number of highways and India's focus on logistics. Warehouses can be set up by retail stores, e-commerce, manufacturing units, franchises, or dealerships to keep the inventory in Godown, which helps expand the reach and reduce the delivery time of products. According to reports, Blackstone Inc. plans to double its India warehouse holding to 100 million sq ft., and it is estimated that over $10 billion in investment will be made in warehouse sectors. Brands like Flipkart, Zomato, Amazon, Zepto, Blinkit, and D-mart are investing in warehouses. Bhiwandi, Malad, Delhi, Gurgaon, Noida, Chennai, Hyderabad and Ahmedabad are key clusters of Warehouses in India. Warehouse audit help to highlight the variance between the inventory recorded in books of accounts and the actual stock kept at the warehouse.

It is essential to conduct warehouse audits at specified intervals, whether you run a retail store, e-commerce, manufacturing unit, franchise, or dealership. BizFoc is a leading warehouse auditor with a PAN India presence and over ten years of experience in inventory verification across different sectors.

What is a Warehouse Audit?

Warehouses play an important role as inventory like groceries, cosmetic products and electronic products, etc. are stored before they are sold or put on display at retail stores. It is a place where different products' SKUs are stored which needs proper inventory management. It is necessary to check the condition and quantity of the stock kept at the warehouse. If warehouse stock is not in order, it can lead to a delay in delivering the goods, or goods can be delivered in damaged condition. Ultimately, this can lead to a negative customer experience. It is necessary to have a warehouse audit timely to count the stock independently of what is mentioned in the account book. The warehouse audit suggests best practices for improving stock management and reducing stock variance.

Warehouse Audit Applicability & Limit

Many businesses conduct warehouse audits due to management requirements rather than the regulatory requirements. The stock verification is carried out as prescribed under the Companies (Auditor's Report) Order, 2020, also known as CARO, 2020. The CARO, 2020 is applicable to below the organisations.

• Public Listed companies
• The warehouse 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

Warehouse Audit Report Format

There is no standard format prescribed for the warehouse audit report. Every company can have their own 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

Warehouse Audit Procedure

There is a comprehensive guidance on the process of warehouse audit which help to conduct the audit properly:

Step 1: Planning of audit

It is necessary to know the auditing scope, types of inventories, warehouse locations, and specific items to be audited. Warehouse audit timeline must be set, taking into consideration 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 warehouse 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.

Warehouse Audit Checklist

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

• Decide on scope of audit, time period and warehouse 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

Warehouse Audit Fee in India

The fee for Warehouse 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 man day, which excludes out of pocket cost and varies with the stock audit scope.

Benefits of Warehouse Audit

• 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 decisions.
• 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 warehouse 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. Warehouse audits help in recognizing optimal stock levels, minimizing financial losses, and improving cash flow.

Popular Warehouse Clusters in India

Major warehouse clusters in India are as follows:

Warehouse in Bhiwandi

Bhiwandi is well-known for its important role in warehousing. It has a strategic geographic position. This city's close proximity to major industrial centers, markets, and transportation routes makes it an excellent location for warehousing operations.

Warehouse in Bangalore

In Bangalore, the surge in e-commerce over recent decades has rapidly increased the demand for warehouse spaces. Many major companies in Bangalore are looking for efficient storage, sales, and distribution of goods.

Warehouse in Nagpur

Nagpur is rapidly becoming a major business hub in India due to its strategic location, excellent connectivity, and well-developed infrastructure. The city has a valuable opportunity to establish a business and gain strategic benefits in the Indian market. As demand for efficient storage and distribution services rises to support expanding businesses, many companies across various industrial sectors are seeking warehouses in Nagpur. These facilities help businesses to store products, materials, and supplies while efficiently managing inventory and supply chain operations.

Warehouse in Hyderabad

Significant changes are underway in rapidly growing tech cities such as Hyderabad. Sectors like FMCG, e-commerce warehousing, and others are experiencing substantial growth. Each business has unique needs, so it is important to maintain visibility of inventory throughout the entire supply chain, including warehousing.

Warehouse in Chennai

Chennai is the capital of Tamil Nadu and is known as the cultural, economic, and educational hub of South India. The city has evolved into a prominent commercial center with its rich historical heritage. Chennai has a diverse industry, including automobiles, engineering, finance, healthcare, and IT. As the city continues to attract businesses from various sectors, the demand for dependable warehousing services is increasing. Companies are actively seeking warehouses in Chennai to optimize their supply chain operations and address market needs.

Warehouse in Delhi NCR (Gurgaon, Noida & Faridabad)

Delhi significantly contributes to this remarkable growth and is anticipated to experience even greater demand for warehouse services. Many famous companies are situated in Delhi, Noida, Faridabad and Gurgaon and there are many warehouses for business purposes. Among them, Warehousing Express stands out as one of the fastest-growing warehousing networks in the country, boasting an extensive network of warehouses across major cities nationwide.

Bizfoc: Warehouse Audit Company in India

Bizfoc is a leading warehouse audit service provider firm in India with a PAN India presence. The Bizfoc team has more than 10 years of experience in inventory audits, assisting companies like Nykaa, Blinkit, and Asian Paints. Bizfoc provides best-in-class services at transparent pricing with a high degree of precision.

Conclusion

Warehouse audits are important for organizations where significant money is invested in the inventory. Organizations like manufacturing units, car dealers, franchisee retail stores, pharma companies, FMCG, and quick service restaurants deal with a lot of inventory, which makes auditing crucial. It ensures the correctness of the stock recorded in the book of accounts and highlights any discrepancies like theft, slow-moving items, and supply chain issues related to inventory. Thus, warehouse audits help improve the organization's profit and loss.

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