The current situation of the Cuban state company is determined by the search for economic and financial solutions that lead to efficient control of inventories.
In the business world, inventory is the set of all assets owned and available for sale to customers and converted into cash within the operational cycle of the company.
The survival and growth of an entity depend on the continuous generation of a certain amount of profits, which is why supply management plays a very important role, since inventories are the fundamental factor for sales, and sales are essential for sales. making a profit.
Inventories represent a fundamental basis in decision-making within any organization, they allow the proper development of it. It is necessary for every company to carry out its procedures in order to guarantee that its inventories are free from possible theft, fraudulent maneuvers or mismanagement in their use. Inventories represent a current asset account and we can define them "As all tangible resources represented by the existence of merchandise, raw materials, products in process, finished products and others, which are intended for marketing, for the production of goods and services or the performance of other operations of the organization. "
INTRODUCTION
The financial situation of an entity is the essential element for any economic analysis and serves as a starting point for managers to make decisions regarding credit management and administration; being of utmost importance for economic planning in the short and medium term.
The constant evolution and development of finance make the world a permanent challenge for those who must apply its usefulness. Businessmen by necessity must judge the causes and effects of the management of the company, this being the main starting point for decision-making in the process of managing the company. As a consequence of these changes, today's entrepreneur has to know how to efficiently manage the resources and merchandise that he has, in addition to managing his inventories properly, maintaining the stock according to his needs and avoiding the immobilization of resources, since this is one of the causes that threaten the financial imbalance.
For the economy, the use and adaptation to our conditions of the most modern methods of operation and administration is vital, including inventory management, coupled with the economic crisis in which the world is immersed and of course, our country is not alien this. At present, the organization develops in a socioeconomic environment where the uncertainty of its future constantly haunts the proper functioning of the company. In this sense, it is necessary to have effective methods or tools to evaluate its management and obtain the necessary basis to make changes for the good of the administration, as well as project the present or future growth of the entity taking into account the level of risk it presents..
The current world is characterized by a high degree of turbulence, understood as the changing situation of the environment. A feature of high incidence in the current environment is competition, it helps organizations develop capacities to enter, maintain and expand in the market.
The Cuban economy is not oblivious to the changes that have occurred in the world; therefore, the use and adaptation to our conditions of the most modern management methods, including inventory management, is vital. For this, it is necessary to achieve various techniques and tools that guarantee the economic efficiency of our entities to obtain profits in minimum terms and make accurate decisions.
The approval of the guidelines of economic policy, in the VI Congress of the Communist Party of Cuba, begins the reordering of the country's economic policy; aspects analyzed and evaluated by CASTRO R, Raúl. (2011) when he stated that “… it is necessary to make an assessment of the state of the economy and the problems to be solved, taking into account the main events and circumstances of external and internal order present since the last congress“ 1.
Given the need for methods that guarantee economic efficiency in the management and control of inventories and in response to article 312 of the economic and social guidelines of the Party and the Revolution (2011), which states that: "" exercise effective control over the management of purchases and the rotation of inventories throughout the commercial network, both wholesale and retail, with a view to minimizing the immobilization of resources and losses2; This research is carried out in the Commerce and Gastronomy Company, as a result of its idle inventory balances, excess stock and a bad one, so it is necessary to implement organizational and management measures to improve this situation that threatens the financial health of the entity.
Therefore, the general objective is: to apply inventory management techniques based on an economic-financial analysis that allows inventories to be efficiently controlled in the Commerce and Gastronomy Company.
THEORETICAL M A R C O
Since time immemorial, the Egyptians and other peoples of antiquity, used to store large amounts of food to be used in times of drought or calamities. This is how the problem of inventories arises or is born, as a way of dealing with periods of shortage that will ensure the subsistence of life and the development of normal activities. This form of storage of all the goods and food necessary to survive led to the existence of inventories. The main purpose of the inventory is to provide the company with the necessary materials, for its continuous and regular development, that is, the inventory has a vital role for consistent and coherent operation within the production process and thus meet the demand.The formulation of an inventory policy for a warehouse department depends on the information regarding lead times, availability of materials, trends in prices and purchasing materials, which are maintained in all inventoried items, as well as establishes physical protection Suitable for protecting items from unnecessary use damage due to faulty inventory turnover procedures and theft.It also establishes adequate physical safeguards to protect the items from any unnecessary damage due to defective inventory rotation procedures and theft.It also establishes adequate physical safeguards to protect the items from any unnecessary damage due to defective inventory rotation procedures and theft.
Inventory definitions
Inventories are tangible assets that are held for sale in the ordinary course of business or to be consumed in the production of goods or services for subsequent marketing. Inventories include, in addition to raw materials, products in process and finished products or merchandise for sale, materials, spare parts and accessories to be consumed in the production of manufactured goods for sale or in the provision of services; packaging and containers and inventories in transit. The basis of any commercial enterprise is the purchase and sale of goods or services; hence the importance of inventory management by it. This accounting management will allow the company to maintain control in a timely manner,as well as knowing at the end of the accounting period a reliable state of the economic situation of the company. However, inventory constitutes the current asset items that are ready for sale, that is, all merchandise that a company has in the warehouse valued at acquisition cost, for sale or productive activities.
There are several definitions of inventory, including:
For (SCHROEDER, 1992), an inventory is a stored quantity of materials that are used to facilitate production or satisfy consumer demands.
In the Cuban Financial Information Standards (NCIF) it is stated that the inventory represents the value of the stock of material resources destined for the entity's consumption or its commercialization (CUBA, 2005). For (ALVAREZ-BUYLLA, 2006) it is a set of resources or goods in good condition that are stored with the aim of being used in the future.
From the legal point of view, the word inventory refers to the method used in the determination, by enumeration and counting, of all the goods owned by a person or a company… On the other hand, from the accounting point of view it has a more limited meaning, when referring only to things or objects that the company owns with the intention of selling (VILLA QUINTERO, 2008). For the author of this research, inventory is the set of merchandise or items that the company has to trade with third parties, for the purchase and sale, or manufacturing before selling, in a given economic period. It consists of tangible goods that are held for sale in the ordinary course of business or to be consumed in the production of goods or services for subsequent marketing.
The inventory is located at various points in the production process, with flows that interconnect one supply point with another. The rate at which a stock can be replenished is supply capacity, and the rate at which it runs out is demand. If demand exceeds supply, the inventory level will decline until rates balance or until the inventory runs out; If supply exceeds demand, the inventory level will increase. The quantity of inventory behaves in a cyclical manner: it starts at a high level, and the quantity decreases as the units are removed; when the level drops, an order is placed, which, upon receipt, raises its level again. It is controlled with the time and the quantity of each order (GALLAGHER, 2005).
Inventory accounting:
Inventory represents one of the most important assets in many companies; In addition, it constitutes the majority of the source of income, both for commercial and industrial companies, so that it significantly influences the result of a period and the financial situation of a company, and is, in general, current assets higher on its balance sheet (VILLA QUINTERO, 2008).
The four generally used costing methods are:
- Specific unit cost: Also known as the specific identification method or specific invoice cost. It is used by companies dealing in individually identifiable items, but it is not practical for items that have common characteristics. They are generally used in inventories with high unit costs and relatively few movements. Average Cost: It is based on the average cost of the inventory during the period. It is determined by dividing the cost of merchandise available for sale (starting inventory plus purchases) by the number of units available. To determine the average cost, three variants are followed:
- Simple arithmetic average cost: The unit cost is determined by adding the unit costs of each entry and divided by the number of entries. This variant has the disadvantage that it does not take into account the number of units of each purchase to determine the average costs. Therefore, when there are differences between the quantities of each lot, its use is not recommended. Weighted average cost: When used, the average cost is determined by dividing the cost of the goods available for sale by the number of units available. Moving average cost: To apply it, an average cost is determined after each entry, from the ratio of the cost of goods in stock; outputs are valued based on the last calculated average cost.
These methods are the tools for deciding the inventory cost flow assumption to be adopted by the business. Which of them is better does not have a single answer, as entities have different reasons and criteria for their selection. Any change made in its use requires a clarifying note in the financial statements issued by the entity. The two main inventory recording systems are the physical or periodic system and the continuous or perpetual system (HORNGREN, 2003).
- Physical or periodic inventory system: When using it, the company does not keep a continuous record of the merchandise in stock. Instead, at the end of the period, a physical count of merchandise in stock is done and the appropriate unit costs are applied to determine the cost of ending inventory. Used to post low unit cost inventory items. Low-cost items may not be valuable enough to be worth the cost of keeping a continuous record of merchandise in stock. With this system the company records merchandise purchases in the Purchasing account (an expense account). At the end of the period, the business removes the beginning balance from the Inventory account and notes the ending balance, which is determined by a physical count. Continuous or perpetual inventory system:By using it, the company maintains a continuous record of each item in inventory, in this way the records show the merchandise available at all times. Perpetual records are useful for preparing monthly, quarterly, or other interim financial statements. The business can determine the cost of ending inventory and the cost of goods sold directly from accounts, without having a physical count of the goods. This system provides a higher control than the periodic system, because the inventory information is always up to date; therefore, companies use the perpetual system for inventories with high unit cost.Perpetual records are useful for preparing monthly, quarterly, or other interim financial statements. The business can determine the cost of ending inventory and the cost of goods sold directly from accounts, without having a physical count of the goods. This system provides a higher control than the periodic system, because the inventory information is always up to date; therefore, companies use the perpetual system for inventories with high unit cost.Perpetual records are useful for preparing monthly, quarterly, or other interim financial statements. The business can determine the cost of ending inventory and the cost of goods sold directly from the accounts, without having a physical count of the goods. This system provides a higher control than the periodic system, because the inventory information is always updated; therefore, companies use the perpetual system for inventories with high unit cost.This system provides a higher control than the periodic system, because the inventory information is always updated; therefore, companies use the perpetual system for inventories with high unit cost.This system provides a higher control than the periodic system, because the inventory information is always updated; therefore, companies use the perpetual system for inventories with high unit cost.
Merchandise purchases are recorded through a debit to the Inventories account. When the company makes a sale, two accounting entries are made: one to record the sale in the usual way, and another to set the cost of sale and reduce the amount of inventory. The debit to Inventories (for purchases) and credit (for sales), is to keep an updated record of the available stocks; therefore, no adjusting entries are needed at the end of the period.
In general, both systems use the Inventories account, however, its mode of use is different in each one; the treatment of purchases, sales, discounts, returns, as well as the determination of the cost of sale, are also. Although the different methods of valuation of inventories can be used in them, their differences are several.
Inventory accounting is a very important part of merchandise accounting systems, because selling inventory is the heart of the business. Inventory is generally the largest asset on your balance sheets, and inventory expenses, called cost of goods sold, are usually the largest expense on the income statement. Companies dedicated to the purchase and sale of merchandise, as this is their main function and the one that will give rise to all other operations, will need constant summarized and analyzed information on their inventories, which requires the opening of a series of main and subsidiary accounts related to those controls. Among these accounts we can name the following:
- Inventory (initial) Purchases Returns on purchases Expenditures on purchases Sales Returns on sales Merchandise in transit Merchandise on consignment
The Beginning Inventory represents the value of the merchandise stock on the date the accounting period began. This account is opened when the control of inventories, in the General Ledger, is carried out based on the speculative method, and does not have movement again until the end of the accounting period when it will be closed with a charge to cost of sales or by Profits and Losses directly.
The Purchases account includes merchandise purchased during the accounting period in order to re-sell them for profit and that are part of the purpose for which the company was created. The purchase of Land, Machinery, Buildings, Equipment, Facilities, etc. is not included in this account. This account has a debit balance, does not enter the company's balance sheet, and is closed due to Profits and Losses or Cost of Sales. Returns on purchase, refers to the account that is created in order to reflect all that purchased merchandise that the company returns for any circumstance; Although this account will decrease the purchase of merchandise, it will not be credited to the purchase account.
Expenses incurred for merchandise purchases should be directed to the account entitled: Shopping Expenses. This account has a debit balance and does not go on the Balance Sheet.
Sales: This account will control all sales of merchandise made by the Company and that were purchased for this purpose. On the other hand we also have Returns for Sale, which is created to reflect the returns made by customers to the company.
On some occasions, especially if the company makes purchases abroad, we find that certain disbursements have been made or payment commitments (documents or money orders) have been made for merchandise that the company bought but that, for reasons of distance or any other circumstance, have not yet been received in the warehouse. In order to record this type of operation, the account must be used: Goods in Transit.
On the other hand we have the account called Merchandise on Consignment, which is nothing more than the account that will reflect the merchandise that have been acquired by the company on "consignment", over which there is no property right, therefore, the The company is not obliged to cancel them until they have been sold.
The Current Inventory (Final) is carried out at the end of the accounting period and corresponds to the physical inventory of the company's merchandise and its corresponding valuation. By relating this inventory with the initial one, with the net purchases and sales of the period, the Gross Gains or Losses in Sales of that period will be obtained.
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Starting from the fact that inventories are essential for sales, and sales are necessary for profits, it follows that the basis of every commercial enterprise is the purchase and sale of goods or services; hence the importance of inventory management by it. Its objective is based on providing or appropriately distributing the necessary materials to the company, making them available at the right time, in order to avoid cost increases or losses. Correctly satisfy the real needs of the company to which it must remain constantly adapted. Therefore inventory management must be carefully controlled and monitored. It is clear to note that inventories consume a significant amount of the total financial resources of a company. So,Correct management of these also means knowing the volume of working capital necessary for their maintenance and making more accurate cash forecasts, hence inventory management outlines the value of the amount of inventory that should be kept, the date on which it is they will place the orders and the number of units that must be ordered each time. In relation to the above, Lucas Morera M., (2002), pointed out, “inventory management is the efficiency in the proper management of the registry, its rotation and evaluation according to how it is classified and that through this we will determine the results (profits or losses) in a reasonable way, being able to establish the financial situation of the company and the necessary measures to improve or maintain said situation ”. 3 “Inventory management” 4,In general, it focuses on four basic aspects:
- Number of units that would correspond to be ordered (or produced) at a given time Timing the inventory should be ordered (or produced) Items in inventory that deserve special attention Protection against changes in inventory item costs
Proper inventory management requires a close relationship between the sales, purchasing, production and finance departments. In this context, the financier must monitor inventory levels in all their magnitude so that the company does not involve its funds in excessive inventories, slowing down the amount of money that must be committed to them. The objective of inventory management is based on minimizing investments and meeting product demand, facilitating production, service and sales functions. In determining the appropriate levels of investment in inventories, it is necessary to consider various factors which should be taken into account for each of the elements that compose them.Among the influencing factors in inventory management are:
- The Consumption Regulation The time interval in which the consumptions are made The delay time for reception Classification and control of products received.
Techn
For inventory management, different techniques are required, the most commonly used would be : 5
1.- Determination of the type of control necessary. The ABC system. Most manufacturing companies confront virtually thousands of items from different inventory. Many of these items are relatively inexpensive, while others are quite expensive and represent a large part of the company's investment. Some inventory items, while not believed to be particularly expensive, rotate slowly and consequently require considerable investment, other items, while high per unit cost, rotate quickly enough that the investment required is relatively low. A business with a large number of inventory items must analyze each item to determine the approximate investment per unit.
one
A company that uses this system must divide its inventory into three groups A, B, C. The maximum investment is concentrated in products "A". Group "B" is made up of the articles that follow the "A" in terms of magnitude of the investment. Group "C" is made up mostly of a large number of products that only require a small investment. Dividing its inventory into products A, B, and C allows a company to determine the level and types of inventory control procedures required. The control of products A must be the most careful given the magnitude of the investment involved, while products "B" and "C" would be subject to less strict control procedures.
two
One of the sophisticated tools that is most commonly cited for determining the optimal order amount for an inventory item is the Economic Order Quantity (CEP) model. This model could well be used to control the items in which the company has the most investment.. It takes into account different financial and operating costs and determines the order amount that minimizes the company's inventory costs.
CEP is a sophisticated inventory control technique and is the most important to illustrate the financial nature of a decision about the amount of an order. The CEP model is applicable not only to determine the lead amount orders for inventory, but it can also be easily used to determine the best production quantity.
3
From a theoretical point of view, the utility of working capital is centered on its ability to measure the equity balance of the entity, since the existence of positive working capital (current assets greater than current liabilities) certifies the existence of liquid assets in a greater amount than debts with short-term maturity. In this sense, it can be considered that the presence of negative working capital may be indicative of an equity imbalance. All this must be understood under the consideration that this situation does not affirm the bankruptcy or suspension of payments of the accounting entity.
The complementary analysis of the average maturity period, as well as the specific maturity period of short-term debts and availability of means, will complement the adequate study of the financial situation highlighted in the balance sheet. (From Wikipedia, the free encyclopedia)
The administration of working capital refers to the management of all the current accounts of the company that include all the current assets and liabilities, in such a way that it is maintained at an acceptable level, this is an essential point for the management and the financial regime.
The administration of the company's resources is fundamental for its progress, because it is this that largely measures the solvency level and ensures a reasonable safety margin for the expectations of managers and administrators.
The main current assets that should be paid attention to are cash, marketable securities and investments, accounts receivable and inventory, since these are the ones that can maintain a recommended and efficient level of liquidity without keeping a high number of stocks of each one, while the most relevant liabilities are accounts payable, financial obligations and accumulated liabilities, as these are the short-term sources of financing.
The pillars on which the administration of working capital is based are based on the extent to which a good management of the liquidity level can be done, since the wider the margin between the current assets that the organization owns and its current liabilities, the greater the ability to cover short-term obligations, however, it presents a major drawback because when there is a different degree of liquidity related to each resource and each obligation, at the time of not being able to convert the more liquid current assets into money, the following assets will have to be replaced since the more of these you have, the greater the probability of taking and converting any of them to meet the commitments.
The primary objective of working capital management is to manage each of the current assets and liabilities of the company. It is said that the higher the risk, the higher the profitability, this is based on the management of working capital at the point that profitability is calculated by profits after expenses against the risk that is determined by the insolvency that the company may have to pay its obligations.
A concept that is gaining strength at this time is the way to obtain and increase profits, and by theoretical grounds it is known that to obtain an increase in these there are two essential ways to achieve it, the first is to increase income through sales and secondly, by reducing costs by paying less for raw materials, salaries, or services provided, this postulate becomes essential to understand how the relationship between profitability and risk is combined with that of an effective management and execution of capital of work.
"The larger the amount of working capital that a company has, the less the risk that it will be insolvent", this is based on the fact that the relationship between liquidity, working capital and risk is that if the first or the second are increased, the third decreases in an equivalent proportion.
Once the previous points have been considered, it is necessary to analyze the key points to reflect on a correct management of working capital in the face of profit maximization and risk minimization.
Natu r alez a company: It is necessary to place the company in a context of social and productive development, since development of financial management in each is different treatment.
Capaci d to d of assets: Companies are always looking for naturally depend on its fixed assets in greater proportion than in current to generate profits, since the former are those who actually generate operating profits.
Cost s funding: The companies obtain resources through current liabilities and long - term funds, where the former are cheaper than the latter.
Consequently, the administration of working capital has variables of great importance that have been previously analyzed in a quick but concise way, each of them are a key point for the administration carried out by managers, directors and those in charge of financial management, it is recurrent then take all the necessary measures to determine a capital financial structure where all current liabilities effectively and efficiently finance current assets and determine optimal financing for the generation of profit and social welfare.
The management of working capital is important for several reasons since the current assets of a typical industrial company represent more than half of its total assets. In the case of a distribution company they represent even more. For a business to operate efficiently, it is necessary to carefully monitor and control accounts receivable and inventories. For a fast growing company, this is very important as investment in these assets can easily get out of control. Excessive levels of current assets can cause the company to achieve a substandard return on investment. However, companies with low levels of current assets may run into deficits and difficulties in maintaining stable operations.
In the case of smaller companies, current liabilities are the main source of external financing. These companies simply do not have access to longer-term capital markets, with the exception of mortgages on buildings. Working capital decisions are about the overall risk-return nature and the price of the company's shares.
To determine the correct form, or the optimal level of current assets, the administration must consider the interaction between profitability and risk, when making this evaluation it is possible to make three assumptions: that the company is a manufacturer, that current assets are less profitable than assets. fixed and that short-term funds are less expensive than long-term funds. The higher the ratio or ratio of current assets to total, the less profitable the company will be and therefore less risky. Or the higher the ratio of current liabilities to total assets, the more profitable and riskier the company will be.Since the net working capital can be considered as part of the current assets of a company financed with short- and long-term funds, it is directly associated with the return-risk and net working capital ratio. (Giovanny E. Gómez FINANCIAL MANAGEMENT01 / 2001)
Effective control of Working Capital is one of the most important functions of financial management. This is given for various reasons, such as the close relationship that exists between the growth of sales and that of current assets. Another aspect is the size of the Working Capital accounts, especially the accounts receivable and inventories, in addition to the current liabilities that represent an important source of short-term financing, another reason is between the effective management of the Capital of Job.
The analysis of the Working Capital is a key factor for the administration, within the field of Financial Management, it is essential to analyze how current items have behaved. It is necessary to know in depth the causes that have created the levels of Working Capital from one period to another.
In most companies, the flows or inflows, and the disbursements or outflows of cash are not synchronized; therefore it is necessary to have a certain level of Working Capital. Cash outflows resulting from short-term liabilities are, up to certain points, essential, the same predictability applies to documents and accumulated liabilities payable. The more predictable the cash inflows, the less Working Capital a company will require.
Inventory control, administration and management:
The inventory is made up of all the goods acquired by a company with the exclusive purpose of allocating them for sale. The items included in this line must be recorded at their cost price, at the price existing for that moment in the market, if it is less than cost. In the case of a commercial company, be represented by the existence of goods for sale on a certain date, on the other hand, in the case of an industrial company, be represented by the inventory of raw materials, products in process and inventories of finished products.
Normally the company operates in an environment that imposes significant financial limitations on inventories, to determine the cash requirement of the company, the inventory must be rotated promptly, since the faster the rotation of the inventory, the lower the amount owed. invest the business in inventory to meet a given demand for goods. This financial goal is often in conflict with the company's goal to maintain sufficient inventories to minimize inventory shortages and meet production demands. The company must determine the optimal inventory level that reconciles these two conflicting objectives.
Several aspects of the inventory require detailed preparation, one of them refers to different types of inventory. Another is related to the different approaches about the most appropriate level of inventory that is maintained in certain functional areas of the company. A third is the relationship between the inventory level and the required financial investment. Each of these three aspects of the inventory is evaluated separately.
Sufficient inventory must be maintained to protect against sudden changes in demand and variations in the level of production, but at the same time it is intended to minimize investment in inventories given the tangible and intangible costs involved in keeping resources in stock.
In this regard, in the book «Fundamentals of Financial Management», Weston states: «… the inventory must be rotated promptly, since the faster its rotation, the lower the amount that the company must invest in the inventory to satisfy a demand for goods… ”,“… This financial objective is often in conflict with the objective of the company, which is to maintain sufficient inventories to minimize the shortage of these and satisfy the demands… ”
Balancing the costs of maintaining and ordering inventory is an essential part of inventory management, resulting in the optimal level of inventory to maintain business operations. With a view to achieving this objective, many theorists have developed mathematical models that offer criteria for decision-making, such as the economic lot size model with its different variants (with allowed depletion, without depletion), to which significant contributions have been made since its invention by F. Harris in 1915. This model is also known as the Wilson formula.
Each author relates inventory management with associated costs, among which the cost of maintenance and the cost of ordering stand out, giving different synonyms without losing the essence of meaning. It also talks about the reorder point, the demand (known or unknown, dependent or independent), delivery time and supply.
Regarding the safety inventory Gupta in the work "Decisions by the numbers" defines it as the inventory that is consumed at a constant rate. When treating this concept, it constitutes the basis for the rational control of inventory, circumscribing its analysis in this sense.
In the company, the aforementioned issues are manifested and that are susceptible to improvement and in some cases of implementation, with the creative and successful application to our conditions of the most sophisticated methods and procedures known up to now. All of this should contribute to achieving greater efficiency in the use of available resources in line with the country's economic policy.
Me to
The organizational methods vary according to the activities carried out in the entities, however, there are general principles that are applicable, such as:
- That the commercial documents (contracts, purchase request, etc.) contain the signature of the official authorized for these purposes. That the same officials do not have the power to sign the purchase request or supply contracts, with the power to sign reports of reception, dispatch orders or delivery vouchers Record in all payment files the requests of the people involved in the purchase request, receipt report, invoice and bank documents A list of people empowered to request products, as well as to approve deliveries and transfers between warehouses. In this relationship, the signature of these officials must be recorded. That the products in the warehouse have stowage cards and that the annotations on them are made at the time of making the movements.Inventory sub-wholesalers must be operated by physical and value accounting.
In the special case of the marketing companies of the MINCIN, such as the Municipal Company of Commerce and Gastronomy, in their organizational measures for the acquisition, control and sale of inventory, other types are included that allow reducing (if efficiently exploited) unnecessary stocks and storage costs, these methods are:
- Weekly meeting of the SACI (guided by the MINCIN) with the aim of knowing the existing inventory and the need for real purchase according to the level of activity and the sales plan, in the Gastronomy part. Monthly meeting of the Purchasing Committee to determine the needs of merchandise for sale (industrial and parallel markets), for the Commerce part Periodic control of the production and expiration dates of the products by the quality part to avoid possible deterioration and losses outside the established standards, which storage costs increase. Provincial meeting for distribution and purchases, with the entities of the organization itself, aims to guarantee the necessary merchandise for the fulfillment of sales, and an efficient control of purchases.
Val
Inventories must be valued at cost or acquisition price.
According to the price in which the inventories are received and the most convenient way in each case. You can adopt different ways of accounting them as they are
to) Inven t Aryanspa r to - consuming, these inventories are received:
- At cost price plus recA population price minus commercial discount. In these cases you can choose two v
Include the commercial surcharge or discount in the price of the product.
Enable subaccounts or analysis (To control separately the price of the product from the surcharge or the corresponding commercial discount).
In case of enabling subaccounts or surcharge analysis or the commercial discount can be adjusted using a coefficient which is applied to consumption.
b) Inven t Aryansd and finished production
These inventories are valued at the actual cost of production, which uses different methods and for which each entity must develop its own cost system, c) Goods for sale
Consumer goods commercial companies record their merchandise inventories at the selling price to the population and in the gastronomy activity, merchandise for sale is analyzed in:
- Goods to be made Goods ready for sale.
In the merchandise account to be processed, the movements of the merchandise used in food processing are recorded, since it performs the function of the raw materials and materials accounts and the finished production account in this activity. In the account of merchandise ready for sale, all movement of merchandise that does not require a prior production process to be sold will be counted (eg. Tobacco and cigars, jams, alcoholic beverages, beers, soft drinks, etc.). In both cases, merchandise for sales is posted at purchase price and the discount granted by the supplier is posted to the trade discount account.
TO
Characterization of the Commerce and Gastronomy Company:
The Municipal Retail Trade and Gastronomy Company, which aims to provide gastronomic and accommodation services, commercialize merchandise, industrial products and sell in the established time and efficiently the products of the basic basket, in addition, guarantee the food service to the organizations for your planned events.
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In the financial analysis of the Commerce and Gastronomy Company, one of the most controversial aspects turns out to be the inventory or stock, since all the economic result of the same is around this, taking into account that during the year that we analyze the materials, Goods and supplies tended to grow, which considerably slowed down the financial development of the entity, this affected its comprehensive results and immobilized a large amount of resources that in warehouse or base units represent the existing stock, and therefore the cost of provisioning or storage was increased, this being also a cause to increase operational expenses, since companies of the type in question must work with the minimum inventory of marketable merchandise no later than sixty days.
Therefore, short-term financial equilibrium will be achieved when, on the one hand, enough money is generated and at the right time; On the other hand, the previous balance must entail that the company has an investment of its materials and current supplies in the appropriate measure, so that it does not maintain an excess that implies idle resources, or a defect that does not allow a possible expansion or the additional cost savings. In this sense, inventory analysis is of great importance, bearing in mind that investment in these items of current assets represents applications of resources that are transformed into sales or commercial production of the company.
Descri
- Sistem to ABC
The ABC Inventory Control System is currently widely used by companies as it allows classifying the inventory into three groups A, B and C. The A items are those in which the largest investment is made, it consists of 20% Of the items that absorb 90% of the company's investment, they are the most expensive or rotate the slowest. Group B, are the following articles in terms of costs, it represents 30% of the articles that require 8% of the investment of the company; Group C consists of a large number of items that represent the entity's smallest investment, approximately 50% of all inventory items, but only two percent of the company's investment in inventory.
A company that has a large number of inventory items must analyze each item to determine the approximate investment per unit. By dividing these inventories into items A, B, and C, it allows the entity to determine the level and types of inventory control procedures required. In the case of the control of type ¨ A ¨ items, it must be rigorous and intensive due to the considerable investment that is necessary for them. In the case of articles B and C, less sophisticated control techniques can be used in them and their level can be reviewed less frequently than articles classified in group A.
Although the ABC System is not perfect, it gives the measure or need for priority control to certain types of inventories according to the investment used in them, it is an excellent method to determine the degree of control intensity that should be had or dedicated to each item of the existing stock in the company.
- Economic order quantity
This model is a sophisticated tool that is commonly used in our economic analyzes, in order to determine the optimal order amount for an inventory item, this technique may well be used to control the items classified in group ¨A ¨ of the company.. It takes into account different financial and operating costs and determines the order amount that minimizes the company's inventory costs. The economic order quantity (CEP) model makes three basic assumptions, which are illustrated below:
- Pri m ero: Assumes that the company knows for sure what is the annual use of a particular inventory item. Is g undo: The frequency of use of the inventory does not vary with time. Third: Orders that are placed to replace inventory stocks are received at the exact moment that stocks run out.
The study of the economic order quantity (CEP) model covers the basic costs that are included, the mathematical system and defects of the model, which is detailed in the determination of the basic costs, ordering, inventory maintenance and costs totals.
To arrive at the economic order quantity, a formula can be applied to a given inventory item, all the costs that influence this model must be calculated, which are:
Order cost = S. R / Q Where:
S = cost of placing an order
R = number of units required in the period. Q = order quantity
This formula measures the order cost of a given item, since the order cost can be expressed as the product of the number of orders and the cost per order.
Inventory Cost = CQ / 2
The cost of inventory has been defined as the average inventory of the company multiplied by the cost per period of keeping a unit in inventory.
Total Cost = S. R / Q + C. Q / 2
Where C = cost of maintaining inventory per unit of the period.
In this case, the formula measures the total cost and the result is obtained by combining the expressions of order cost and inventory maintenance cost.
All these lead to the general formula to obtain the CEP, which is the following:
2 RS
Q = Û ……. (General formula for the calculation of CEP) C
- Punt or Reorder
The reorder point is the inventory level that determines when an order should be placed.
Reorder point = time frame in weeks * weekly consumption
When there are goods in transit (These are products that have been ordered but have not yet arrived and enter the inventory)
Reorder point = time frame X weekly consumption - merchandise in transit
TO
- Determination of the type of control necessary: The ABC System.
In the analysis carried out applying the ABC technique, the types of products were classified according to their importance for the fundamental activity of the company and at the same time taking into account the degree of investment of the entity in these inventories, which yielded the result of the table shown below.
When analyzing the inventory according to the ABC System, to determine the type of control necessary, it can be observed in table No. 1 (Annex # 1) that the group contains the inventory of industrial products and consumer goods for two reasons, firstly because they are the most financially important since they directly intervene in the commercial production of the entity and secondly because although they represent 20% of the items in stock, they correspond to 83% of the investment in inventory, as can be seen in table 1 (Annex # 1) the unit investment cost of this group is the highest $ 481.04; This shows that the company must maintain an intensive control of this group of articles due to the considerable investment that they represent and apply the most sophisticated existing control techniques.Regarding the articles of group ¨B¨ we can see that the merchandise to be elaborated and the lists for sale are included, of the gastronomy activity, in this case the articles represent 30% of the inventory and its investment 8%, the cost Investment unit amounts to $ 60.07 for each one, much lower than those of type ¨ A ¨ this means that they should be controlled with less rigor, although because they belong to the fundamental activity they will be analyzed periodically since their investment cannot be increased but decreased or maintained; Those of the Group ¨C¨ are the auxiliary materials and raw materials to the fundamental activity and only represent 1.8% of investment with a cost of $ 4.05 per unit, which places them in the last position and can be applied (as well as B), some less rigorous technique and pay a minimum of attention to it.
- Model or basic economic order quantity (CEP).
It is proposed that this model be applied to control the items classified in group ¨A ¨, that is, industrial products and consumer goods, due to their importance for the entity, which was demonstrated through the ABC method; This should take into account different financial and operating costs and determine the order amount that minimizes inventory costs, which is shown in table # 2 (Annex # 2).
The table (Annex # 2) shows the calculation by logical steps of the costs involved in determining the economic order quantity (CEP), where it is evidenced that according to the order quantity and the order number, the maintenance cost and the total cost grow considerably due to the annual order cost, so much so that for the last order quantity of 1 624 units the lowest annual maintenance cost of 195.3 MP is required however due to its annual cost a total cost of 9,895.3 MP is reached, taking into account that the order number is increased to 4 times.
Observing in table # 3 (Annex # 3) the economic order quantity, according to the applied formula, varies depending on the order quantity, its cost, the maintenance cost and the average inventory, which determines that, If the company orders 20, 40 and 80 units in each case, it can considerably minimize its costs, while taking into account its average annual inventory so as not to excessively increase the stock.
- Punt or reorder.
Analyzing in table # 4 (Annex # 4) the reorder point, (time to order), according to the applied formula, varies according to the classification of the types of inventories by the ABC system, showing that the items classified in group A they are the ones that are consumed more quickly so the weekly period of time is shorter, because they are the ones of greater financial importance since it intervenes directly in the commercial production of the entity and secondly because the unit cost of this group is the highest.
CONCLUSIONS.
- Inventories represent a fundamental basis in decision-making within any organization, they allow its proper development The use of the ABC system showed that articles, industrial products and consumer goods are in group A because they are the most important financial and represent 20% of the items in stock The economic quantity model varies depending on the economic order quantity, according to the applied formula, it varies depending on the order quantity, its cost, maintenance cost and inventory average
RECOMMENDATIONS.
Based on the above conclusions, the following is recommended:
- Evaluate the proposals presented and apply them in the inventory management to improve the economic-financial management of the entity Decrease inventories and excess stock, to achieve a favorable result in the working capital and financial indicators of the company Apply techniques and procedures used in research to eradicate deficiencies in the company's inventory management
BIBLIOGRAPHY.
- AGUIRRE Sabada, Alfredo, Economic fundamentals and business administration. Editorial Pirámide A.ÁLVAREZ López, José, Balance Sheet Analysis. Audit, Aggregation and Interpretation. Editorial Donostiarra SAARBONES Malisani, Eduardo A., Business Logistics, Editorial Alfaomega - Marcombo, Venezuela, 1999 ARREDONDO García Antolín, Logistics and Provisioning Information Technology, Editorial Index, Madrid, Spain, 1991 BAYOS Sardiñas, M and Benítez Miranda, MA, Dictionary of Economic Terms; Editorial Pueblo y Educación. BENÍTEZ Miranda Miguel, Accounting and finance for the economic training of management cadres. Editorial ¨ Ministry of Light Industry ¨ Havana City, Cuba, 1997. CASTRO R. “Central Report to the Sixth Congress of the PCC”, Granma Newspaper, April 16, 2011. Accounting and Financial Economic Management Course,Finance and Prices Department, MINCIN, Habana, Cuba, 1996. HONGREN, C, Financial Accounting. Volume 1 and 2. Edited by the Ministry of Higher Education Outline of the economic and social policy of the Party and the Revolution. Havana. Cuba. 2011. Article No. 312.MORENO, J Finance in Companies. Edited by the Ministry of Higher Education MORERA, Lucas. "Inventory control". 2002. Available on the internet: http://www.monografias.com. (Consulted on March 16, 2015) PERDOMO, A, Analysis and Interpretation of Financial Statements. Ediciones Contables y Administrativas, SASOLANO Ricardo F., Inventory Administration, Supply and Physical Distribution, Editorial El Colloquio, Argentina, 199SUÁREZ, Suárez Andrés: Optimal Investment and Financing Decisions in the company, Editorial pirámides SA 199VAN HORNE, James C., Fundamentals of Financial Management. Editorial Prentice Holl Hispanoamérica SA, 1998VISCIONE Jeny A, Financial Analysis Principles and Applications. Editorial Limusa, 1991. WESTON, Fred and Copeland, Fundamentals of Financial Management. Volume I. Editorial MES.WESTON, TF, (2006). "Fundamentals of Financial Administration", Havana: Editorial Félix Varela, Vol. I.
TO NEXOS. A n exo # 1
Table a # 1: Results of the ABC technique to determine the type of control required. Source: self made. U / M: Units and MP.
A n exo # 2
Table # 2: Calculation of inventory costs to arrive at the economic order quantity. Source: self made.
To nex or # 3
Table # 3: Determination of the economic order quantity (CEP) Source: Own elaboration.
To nex or # 4
Table a # 4: Determination of the reorder point. (ROP). Source: self made.
| Classif i cation | Tip or s inventory | C to nt i ty of Office Products or s and n (U) | Consu m or weekly
(1) |
Term tie m po
(2) |
Reo r den point
(1 * 2) (3) |
| G r up o A | Pr o du ct o s ind u striale s and consumer goods | 6498 | 4530 | one | 4530 |
| Group or B | I r Cancias pair to develop and ready for sale | 9822 | 2328 | 4 | 9312 |
| Group or C | Ma t e ria raw s and materials, parts and supplies | 16260 | 6530 | two | 13 0 60 |
| Total | 32580 | 13388 | 7 | 26 9 02 |
