This is a reprint of an article I found a few years back. I included it here because it explains the various ways that the results of your most recent physical inventory can vary from the amount predicted in your Materials Management Information System (MMIS). Those amounts, in turn, can vary significantly from what Fiscal Services says should be in your perpetual inventory (last inventory amount plus (+) purchases minus (-) expenses or products sent to the Nursing Floors or other Departments plus (+) credits, or returns to Inventory).
In short, when trying to justify a huge inventory variance as a write-off, don't rack your brain trying to tick & tie every financial entry as either a purchase or a debit. Just relax. They'll never cross-foot anyway.
The next time your inventory count is off, do the following: Don't blame the inventory clerks. Don't blame the perpetually-wrong perpetual inventory process. Don't blame the MMIS or Y2K or the full moon. It's not the fault of the cycle counts, either. Don't even think of Bigfoot; he's not to blame. Make the necessary adjustment to the books and say "It was a combination of numbers 15, 42 and 66." Finance will understand. They always do.
Errors in establishing or maintaining the Item Master Database
1. Conversion factor error, established as a case of 12 boxes instead of a case of 10 boxes.
2. Vendor changed packaging. Now has 8 boxes/case but the Item Master was not changed.
3. & 4. Wrong vendor number entered in Item Master. The vendor number is for size 30 item. Each time size 3 is ordered, size 30 is received. This error now affects two products each time it occurs.
5. Multiple item numbers established for a single product. One description is for Item - Pediatric, another reads Item-Size 3. To confuse us further, a third entry is for Size 3 items. Additional mistakes occur when multiple staff enter new products into the database without a consistent basis for product nomenclature or naming conventions. The most common entry is for Foley, Catheter and Catheter, Foley. Two entries; one item.
Inventory errors created in the Physical Inventory Count
6. The item was miscounted.
7. & 8. The item count is entered for another product. Two errors are created.
9. The correct count is changed by someone recounting.
10. The item is counted 3 times - once for each description which appears on the count sheets derived from the Item Master.
11. The incorrect quantity is entered by a data entry person unfamiliar with the product.
12. & 13. The incorrect stock number is entered by data entry. This causes 2 errors.
14. The person counting couldn't find any Size 3 items, assumed there were none & entered "0" on the count sheet.
15. The count was made in the wrong unit of measure - cases instead of boxes.
16. The count was made in "each" instead of boxes.
17. A late receipt, which had not been put away, was not counted.
18. A supply of Size 3 items on the loading dock were counted, although they hadn't been received yet.
19. A requisition picked prior to the inventory was not deducted from inventory until after the physical count was completed.
20. An emergency order picked during the inventory was processed. Items-Size 3 were counted, yet the issue quantity was added to the count.
21. During one of the periodic cycle counts, one (or more) of the above errors were made.
22. A quantity of items, loaned to another Hospital, were not relieved from inventory & created a discrepancy in the physical count amount.
Inventory errors created by Purchasing
23. Purchase Order states 2 cases, but the order was phoned in as 2 boxes.
24. Purchase Order states 2 cases, but the vendor asks to ship 18 boxes instead. Purchasing approves but does not change the original P.O..
25. Two boxes are ordered from the alternate vendor. When Receiving enters the receipt of 2, 20 boxes are assumed received.
26. Wrong Hospital number entered on Purchase Order creating an error on two products.
27. & 28. Wrong vendor number entered on Purchase Order. Vendor ships the item ordered.
29. Purchase Order increases from 2 cases to 4 cases. Receiving is not notified of this change. When the day's workload of 134 cases of various sized items are received, Purchasing assumes that Receiving will discover this small change.
30. The Purchase Order which will never close. Items are added on & added on well after the Purchase Order is cut & transmitted to the vendor. Another source of infraction is the Company or Rep who continually adds products to the standing Purchase Order, thinking that number is in perpetuity.
Inventory errors made by Receiving
31. The Hospital was overshipped by the vendor, yet only the amount purchased was received.
32. The Hospital was short-shipped and the amount purchased was received.
33. Receiving counted incoming items twice and indicated an over-shipment on the Receiving Report. The correct quantity was shipped.
34. The correct quantity was delivered but Receiving ciounted the shipment short & noted this shortage on the Receiving Report.
35. Damaged goods were refused, but the Receiving report indicated a complete shipment.
36. Damaged goods were received, then returned to the vendor. The return was not noted in the MMIS.
37. Someone in Receiving damaged an item & disposed of the product without accounting for the loss.
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