Inventory principles explained clearly
The principles of stocktaking form the foundation of a correct and legally compliant inventory. They ensure that assets are recorded completely, correctly and comprehensibly.
Find out which inventory principles must be observed, why they are indispensable for retail companies and how their consistent application sustainably improves the quality of inventory data and operational efficiency.
What are inventory principles?
Inventory principles define the rules according to which a inventory is carried out to ensure accuracy and legal certainty. In Germany, every merchant is obliged to carry out an inventory at the end of the financial year in accordance with Section 240 HGB. Certain requirements must be met to ensure that this inventory is carried out properly and comprehensibly.
These requirements are referred to as the principles of proper inventory (GoI) and are part of the principles of proper accounting (GoB). They ensure that all assets and liabilities are fully recorded and correctly documented and therefore form the basis for bookkeeping and annual financial statements.
Why are inventory principles important?
Compliance with inventory principles is of central importance for companies for several reasons:
- Legal certainty: compliance with legal requirements and minimization of audit risks.
- Reliable inventory data: Early detection of deviations and a secure basis for valuations.
- Efficiency and cost-effectiveness: Optimized warehouse processes, fewer stock-outs and better use of resources.
- Trust and transparency: Strengthening credibility with management, employees and external partners.
OMS Retail uses standardized processes, experienced inventory teams and documentation-proof procedures to ensure that all inventory principles are adhered to completely, correctly and in compliance with auditing requirements.
Central inventory principles at a glance
For a proper stocktaking is based on fixed principles that ensure a complete, correct and comprehensible inventory. They determine how assets and liabilities are recorded, valued and documented and thus form the basis for reliable inventory results:
Principle of completeness
A complete inventory means that all assets and liabilities economically attributable to the company are recorded on the inventory date. This is the only way to create a reliable inventory that forms a solid basis for valuation and financial statements:
Recognition of all assets:
All assets and liabilities must be included - regardless of whether they appear obvious or unusual.
Avoidance of gaps or double entries:
Each item may be entered exactly once; neither omissions nor multiple entries are permitted.
Inclusion of low-value or indirect items:
Low-value assets, provisions or economically attributable assets must also be taken into account if they are attributable to the company.
Economic imputability as a benchmark:
The decisive factor is not only the legal affiliation, but also the economic attribution of assets and liabilities to the company.
Documentation of the entire inventory:
The inventory must be designed in such a way that it is clear that all relevant stocks have been included and that no important items have been omitted.
Conscientious adherence to the principle of completeness ensures that the inventory reflects all relevant stocks and thus provides the company with a solid database for management, accounting and auditing.
Principle of correctness
The principle of accuracy requires that all inventories are correctly stated in terms of type, quantity and value. Each item must be recorded correctly and valued without errors so that the inventory data provides a realistic picture:
Type specification:
Each asset or liability must be described in such a way that it can be clearly identified.
Quantity recording:
The quantity must be precisely counted, weighed or measured - estimates are only permitted for certain procedures.
Value determination:
The valuation must be carried out appropriately, typically by valuation in accordance with legal requirements or recognized methods.
Truthful data:
Information must not be inflated, embellished or falsified; it must reflect the actual circumstances.
Renunciation of arbitrary procedures:
Valuation methods must be comprehensible and justifiable; arbitrariness in valuation or disclosure is excluded.
A clear structure ensures that stocktaking runs smoothly, comprehensibly and efficiently. Standardized processes and fixed responsibilities prevent misunderstandings and facilitate control.
At the same time, an orderly organization strengthens data quality and creates trust in the results. This makes stocktaking a transparent and reliable process.
Principle of verifiability
The principle of verifiability requires that both the inventory procedure and the recorded results are documented in such a way that a knowledgeable third party can understand them within a reasonable period of time:
procedural documentation:
It must be clear how inventory methods have been selected and applied, e.g. through an inventory framework plan, count and inventory lists.
Clear designations:
Assets and liabilities must be listed in such a way that the type, quantity and value are clearly recognizable - this enables an independent audit.
Verifiability by third parties:
An expert auditor must be able to verify and understand the results without unnecessary involvement of the company.
Retention of relevant documents:
All inventory documents - such as lists, valuation certificates and documentation - must be stored in such a way that subsequent audits are possible.
The consistent implementation of the principle of verifiability creates transparency and audit security. Only in this way can the inventory be presented credibly to internal and external control bodies.
Principle of individual valuation
The principle of individual valuation requires that each asset and each liability must be valued individually - not as a lump sum or in groups:
Individual assessment:
Each item must be measured separately so that increases in value are not offset against decreases in value of other items.
Prohibition of offsetting:
Assets may not be offset against liabilities in order to ensure the disclosure of a realistic individual value.
Exceptions permitted:
Only in exceptional cases - e.g. in the case of large quantities of similar goods - are procedures such as group valuation or fixed values permitted, provided that this does not compromise the valuation objective.
Evaluation standard:
In particular, acquisition or production costs or the lower fair value or repayment amount in the case of liabilities are used for measurement.
Compliance with the principle of individual valuation contributes significantly to the accuracy and credibility of inventory data. This gives companies a differentiated picture of their inventories and liabilities - an important prerequisite for sound accounting and internal management.
Principle of clarity
The principle of clarity requires that information in the inventory is designed in such a way that it is understandable, unambiguous and clear for both internal and external users:
Clear designations:
Every asset and every liability is clearly named so that no misunderstandings or misinterpretations arise.
Structured presentation:
Lists and inventories follow a comprehensible order so that type, quantity and value can be recognized at a glance.
Avoidance of confusion:
Clear structuring and the avoidance of unnecessary complexity ensure that inventory results can be found and checked quickly.
Link with verifiability:
A transparent and comprehensible presentation facilitates the audit by third parties and supports the regularity of the inventory as a whole.
The consistent implementation of the principle of clarity makes a decisive contribution to ensuring that inventory data is not only recorded correctly, but can also be used efficiently and evaluated in a comprehensible manner.
Principle of economic efficiency
The principle of economic efficiency requires that the cost of the inventory must be proportionate to the results achieved. It is permissible to use recognized simplification procedures as long as the objective of the inventory is not compromised:
Cost-benefit ratio:
The effort (time, personnel, costs) required to carry out the inventory must not be disproportionately high compared to the benefit of the results.
Utilization of simplified procedures:
Permitted are e.g. inventory sampling, group valuation or fixed values, provided these do not jeopardize the validity and regularity of the inventory.
Materiality test:
It is necessary to check whether the item or stock to be recorded has a significant influence on the informative value of the inventory - only in the case of significant items does a complete expense appear justified.
Efficient organization and documentation:
In addition to the actual inventory, attention should be paid to a lean organization, clear workflows and digital or automated processes in order to reduce costs and effort.
If this principle is observed, the inventory can be designed efficiently without compromising the quality of the results.
Your inventory in the best hands - with OMS Retail
An inventory is not only required by law, but is also crucial for transparent inventory data and reliable annual financial statements. It forms the basis for reliable valuations, strategic decisions and audit-proof checking processes.
With over 20 years of experience in stocktaking, OMS Retail supports retail and chain store businesses in carrying out reliable, structured and audit-compliant stocktaking. With well-coordinated teams, standardized processes and proven procedures, we ensure that all relevant inventory principles are reliably adhered to - from completeness to cost-effectiveness.
Place your trust in established procedures when the focus is on accuracy and traceability.
Do not hesitate to contact us
Book your full-service inventory now and gain a reliable partner who will take the pressure off you in the long term. Give us a call or use our contact form for a personalized offer and you and your store network will benefit from our full service for a fast and efficient inventory in the future.
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E-Mail: info@oms-retail.com
Phone: +49 (0)511 / 515 283-0