Inventory Controls to Prevent Waste and Theft

Retailers, wholesalers, and manufacturers are typical businesses that hold inventory (stock).

Inventory comes with risks such as damages, theft and obsolescence. It also ties up capital and has related administrative costs. You can lose money on inventory.

But you don’t want to lose money so you must put in controls over inventory. The types of controls you need depends on the type, volume and value of inventory.

In this article we present some key inventory control concepts.

First things, first

Managing inventory involves at a minimum the following activities:

  • Receiving items
  • Releases from stores
  • Storage
  • Accounting

To get control, you must control these areas. You also need good records for your inventory controls to work.


The goal is to ensure that you receive only approved purchases into inventory. Some actions required are:

  • Accept only deliveries for which there is a purchase order or authorization.
  • Inspect all deliveries and ensure they meet the specifications.
  • Note and separate damaged goods.
  • Count items received.
  • Reject excess material.
  • Tag all items received.
  • Complete the receiving report with codes, description and quantity.

Releases from Stores

The aim is to make sure stores release only goods approved for issue or shipment. Some actions required are:

  • Review requisitions or picking tickets for authorization.
  • Compare picked items to requisitions and sales orders.
  • Compare shipping documents to sales orders.
  • Keep accurate shipping logs. A shipping log is a record of all shipments. It has details such as date, recipient’s name and address, carrier or shipping method, the number of packages and waybill.
  • Forward shipping documents to accounting.
  • In accounting, match forwarded documents such as waybills and packing slips to the shipping log.



  • Secure inventory with physical barriers such as fences, stores with locks, security guards and surveillance equipment such as cameras.
  • Restrict warehouse access to approved personnel.
  • Ensure that you bag, box and label items with location, identification number, unit of measure and quantity.
  • Implement cycle counting, and investigate of any errors found.

Maintaining and Reliable Inventory Records.

For strong controls over inventory, you must keep up-to-date inventory records. Manual inventory systems are inefficient, so consider using computerized systems which are more efficient.

Segregation of Duties         

If one person authorizes, holds the inventory, and keeps the records, you create an ideal opportunity for fraud. Organize work to build in checks.

Different people should authorize, keep the items and the records. For example, the storekeeper should not keep the accounts for inventory.

Take Away

Inventory control is crucial if you hold inventory. To get control:

  • You must establish controls over receiving, releasing and holding inventory in storage.
  • Ensure that roles like authorization of receipt and releases of inventory, keeping the inventory items, and keeping the accounting records for inventory are by performed different people.
  • Use software to manage inventory.

Getting a strong control over inventory is a skill. Talk to your accountants about how to create good inventory controls.

Should you have questions about this or article or need help with inventory control, contact us at in**@sc*.gh