tawandamusarurwa
Entrepreneurship Matters
Dr Kudzanai Vere
EVERY organisation seeks to maximise return on its investment, either in products (stocks) or services.
There is, therefore, need to ensure the investment is safe, secure and risk-free.
The risks include failure to account for inventory. It then becomes necessary to have checks and balances in place in the form of periodic stocktaking to check the levels of stock. A number of fledgling enterprises miss this point, as they think business is all about ordering stock and cashing in. No!
Businesses could be losing more than they are getting by failing to properly account for the ordered stock.
There are many ways stock can be lost within an organisation.
The case of Janet
Janet opened her big grocery shop in Chitungwiza from her gratuity.
She bought four point-of-sale (POS) machines to make the invoicing easy.
The location proved busy and her daily sales were encouraging.
She had 10 employees at her shop – four till operators, a store supervisor and some shop-floor workers.
For the first five months, the shop’s stock swelled to the extent that Janet rented a nearby warehouse. She could not imagine winding up or getting out of business until the store supervisor and the warehouse minder teamed up to siphon stocks for their own benefit.
Janet did not do any stocktaking and her stocks eventually dried up, as the team was taking more than she was replacing.
Eventually, the budding entrepreneur found herself out of business.
Clearly, the availability of systems and internal controls that are religiously followed can act as a deterrent to those who would want to pilfer from the organisation.
Business is more than ordering and cashing in. At the same time, business management is more than checking on daily cash sales.
Internal controls can safeguard your investment.
Way forward
There is need to continuously check whether the presumed stock is tallying with the actual stock.
Putting in sufficient controls reduces the risk of losing out on one’s hard-earned investment.
Stocktaking is one of the key preventive and detective controls.
When employees see stock being counted at the end of every month, they will fear being caught come month-end.
That alone acts as a deterrent.
The same method can also be used to detect shrinkage.
It is important to have these internal controls in place and effectively monitor them. Employees naturally do not want to follow them in order to create loopholes and capitalise on them.
They have nothing to lose, as they can easily switch employers.
So, it is the directors’ mandate to put these in place to safeguard their investment.
The duty of employees is to implement these, obviously under strict supervision and monitoring.
Conclusion
Never disregard internal controls as they can assist you to prevent, detect and take corrective action on some anomalies in your business. Stocks should, therefore, be counted every now and then.
◆ Dr Kudzanai Vere is the chief executive officer of Kudfort Zimbabwe, an accounting and business advisory firm. Feedback: [email protected] or call +263719592232
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