A number of policies can be used to bolster the system of controls for in­ventory. The 20 policies in this section are broken down into subcategories for receiving, record accuracy, valuation, and obsolescence. The next three policies help ensure that incoming inventory is properly inspected, recorded, and stored.

1. Incoming inventory shall be recorded after it has been received and in­spected. This policy ensures that the quantity and quality of incoming inventory has been verified prior to recording it in the inventory data­base, thereby avoiding later problems with having incorrect usable quantities on hand.
2. Goods received on consignment shall be identified and stored sepa­rately from company-owned inventory. This policy keeps a company from artificially inflating its inventory by the amount of incoming con­signment inventory, which would otherwise increase reported profits.
3. Consignment inventory shipped to reseller locations shall be clearly identified as such in both the shipping log and the inventory tracking system. This policy keeps a company from inflating its sales through the recognition of shipments sent to resellers that are actually still owned by the company.

The next six policies are useful for improving inventory record accu­racy by assigning responsibility for accuracy, mandating regular counts, re­quiring up-to-date record updates, and restricting access to both the inventory itself and the inventory database:

1. The materials manager is responsible for inventory accuracy. This pol­icy centralizes control over inventory accuracy, thereby increasing the odds of it being kept at a high level.
2. A complete physical inventory count shall be conducted at the end of each reporting period. This policy ensures that an accurate record of the inventory is used as the basis for a cost of goods sold calculation. However, it is considered counterproductive if an effective cycle count­ing system is already in place.
3. Cycle counters shall continually review inventory accuracy and iden­tify related problems. This policy is intended for perpetual inventory systems, and results in a much higher level of inventory accuracy and attention to the underlying problems that cause inventory errors.
4. No inventory transaction shall occur without being immediately recorded in the perpetual inventory database. This policy keeps the in­ventory database accurate at all times, preventing errors from arising when employees adjust the database on the incorrect assumption that the current record is correct.
5. No access to the inventory is allowed by unauthorized personnel. This policy generally leads to the lockdown of the warehouse, yielding much greater control over the accurate recording of inventory issuance transactions.
6. Only designated personnel shall have access to the inventory database and item master file. This policy ensures not only that just trained em­ployees adjust inventory records, but also that the responsibility for record accuracy can be traced to designated people.

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