An inventory policy is a page or two that says how stock is handled in your business: how it comes in, where it goes, how it's counted, who can change the numbers and why, and what happens to stock that can't be sold. In a business of one it lives in the owner's head. It needs writing down the day someone else starts receiving deliveries or counting the shelves, because a rule nobody wrote down is a rule nobody else follows. Below is what goes in one, twelve sections filled in for a salsa maker, the rule that's easiest to skip, and a free template with an adjustment approval check.
The short version
- Write down what you already do: receiving, storage, rotation, counting.
- Every adjustment has a reason, and big ones need a second person.
- Say what goes on hold, and who releases it.
- Say how stock is valued, and how write-offs are handled.
- Give the policy an owner and a review date.
- Keep it short enough that people read it.
- TaroStack records every change with who, when and why, and keeps held stock apart from what's for sale. More below.
What goes in an inventory policy
| Section | What it says |
|---|---|
| Scope | Which stock and which places it covers |
| Receiving | How deliveries are checked, counted and recorded, and what happens to problems |
| Storage | Where things live, what's kept apart |
| Rotation | Which stock is used and shipped first |
| Counting | How often, which items, and how a count is done |
| Adjustments | The reasons allowed, and who approves which sizes |
| Holds | What goes on hold and who releases it |
| Valuation | How stock is valued, and how often it's reported |
| Write-offs | How expired or damaged stock leaves the books |
| Access | Who moves stock |
| Reordering | How reorder points are set, and who approves big orders |
| Records | What's kept, and for how long |
A filled-in example: a salsa maker's policy
Saguaro Salsa Co., a made-up salsa maker in Tucson, Arizona, I use in these examples, wrote its policy when it hired its second person. The parts that matter most:
| Section | Saguaro Salsa's rule |
|---|---|
| Receiving | Every delivery checked against its purchase order, counted, and recorded with its lot and best-by date the day it arrives; problems told to the supplier the same day |
| Rotation | Earliest date first; labels face out, new stock behind old |
| Counting | Cycle counts weekly: A items every week, B items monthly, C items each quarter; a full count on December 31; counts blind |
| Adjustments | A reason every time; up to $100 by the counter, over $100 approved by the owner |
| Holds | Anything that fails a check, is being investigated or is recalled goes on hold until the owner releases it in writing |
| Valuation | At cost, first in first out, freight included, reported monthly |
| Write-offs | With reason, date and who; over $250 in a month reviewed with the owner |
How cycle counts are planned is in cycle count form, the year-end count in year end inventory count, and holds in hold and release procedure.
The rule that's easiest to skip: approvals
Every business adjusts its stock: a case is dropped, cilantro wilts, a count finds an extra sack of onions. The policy's job is to make sure each adjustment says why, and that a big one isn't made by the same person who might have caused it. Saguaro Salsa's limit is $100:
| Date | Item | Quantity | Value | Reason | Needs approval? |
|---|---|---|---|---|---|
| Oct 5 | Jar, 16 oz, case of 12 | −2 | −$19.20 | Damaged | No |
| Oct 9 | Cilantro, 1 lb | −6 | −$16.80 | Spoiled | No |
| Oct 13 | Salsa roja, 16 oz jar | −36 | −$138.60 | Expired | Yes, approved |
| Oct 14 | Onions, 50 lb sack | +1 | $28.00 | Found | No |
The expired salsa is over the limit, so the owner approved it, and the reason sends a message too: 36 jars expired means the batch was too big for the orders. The form behind an adjustment is in inventory adjustment form.
Get the template
Download the inventory policy template. Two sheets: a twelve-section policy filled in for the example, to change to yours; and an approval check, where each adjustment's value fills in and Needs approval? says Yes when it's over your limit, until someone's name is in Approved by. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
A written policy says every adjustment has a reason; a spreadsheet lets anyone type over a number without one. The policy says held stock isn't shipped; the person picking Friday's orders doesn't see the hold. A policy is only as good as the system that makes it the easy way.
How TaroStack does it
TaroStack records every change with who, when and why, and keeps held stock apart from what's for sale.
Every change has a reason. Every movement of stock is a permanent record of who, when and why. An adjustment carries its reason, lost, damaged, expired, spoiled, sample, found, correction or customer return, so waste can be reported by reason, item and site, and corrections are recorded as corrections.
Holds apart from sale. Quarantined, held and damaged stock sits apart from what's available to sell, so a hold in the policy is a hold on the picking list too, and stock is picked earliest date first.
Counts and value. Counts are done on a phone, even with no signal, and stock is valued at cost, first in first out, freight included, by site and month.
| The job | Policy on paper | In TaroStack |
|---|---|---|
| A reason for every adjustment | A rule people may follow | Required on every adjustment |
| Waste by reason | Added up at year end | Reported by reason, item and site |
| Held stock not shipped | A note on the shelf | Kept from sale |
| Stock value at cost | Worked out at year end | By site and month, first in first out |
Counting, adjustments, holds and stock value are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.