Hubbell Policies

CYCLE COUNTING & PERPETUAL INVENTORY ACCURACY POLICY

English

Owner : Vice President, Controller

Last Review: 2021.02.25

FIN – 19

Department: Finance

POLICY

All business units which hold cycle count certified inventory must follow the procedures outlined in this Policy.

SCOPE

This Policy establishes guidelines for cycle counting and the reporting of perpetual inventory accuracy and sets forth the minimum requirements to rely upon perpetual inventory records in lieu of an annual physical inventory count. This Policy only covers inventory that is currently certified under the cycle count program or inventory that is being monitored with the intent to request cycle count certification.

PURPOSE

The purpose of this Policy is to ensure that perpetual inventory records properly reflect inventory on-hand throughout the year.

PROCEDURE

Cycle count compliance program requirements include the following:

A. Organizational Independence & Controls B. Initial Certifications C. Cycle Counting Procedures D. Cycle Count Reporting E. Minimum Requirements for Financial Reliance F. Recertifications, Compliance Reviews, and Quarterly Monitoring

A. Organizational Independence & Controls

The following organizational and procedural issues must be addressed to ensure that the cycle count program and perpetual inventory system are functioning as intended:

• Segregation of Duties - Cycle counters and the personnel assigned with administrative tasks associated with cycle counting must be organizationally independent from those responsible for the physical custody of the inventory and accountable for the accuracy of the perpetual inventory records (i.e. operations). • Cycle Count Adjustments - All significant cycle count adjustments should be investigated to determine the root cause of the errors. The root cause analysis must be documented and reviewed with the Operations Manager at least monthly. The Business Unit Controller and the Operations Manager (or their respective designees) should review and approve all significant cycle count adjustments. Business Unit Controllers will establish approval guidelines locally and for their respective businesses. Cycle count adjustments should be recorded in the general ledger and should be segregated and accumulated in a separate general ledger sub account or transacted with unique transaction codes (typically inventory movement types 701/702 or 711/712 in SAP) so that they can be identified from the other inventory

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