The Imprest Stock system is commonly used to improve the ability to meet instant customer demand and to reduce time gaps between the deliveries of new items. The system helps companies as well as individual dealers to decrease gross loans and ensure a balanced stable cash flow.
Based on maximum level specified by a company for each its item, the imprest stock system provides its users with items and supplies that can be fully managed and provided in advance, before this or that item runs out of the stock. This reduces significantly transportation and storage costs and improves customer satisfaction levels.
Any company aims at providing the highest level of customer service. The level of service can determine the value that characterizes the size of the company's overall efforts to complete their customers' orders. The following factors determine the success of a specific enterprise-level service:
An imprest stock system that implies a steady replacement of used items with the same amount of new ones. However, sometimes things are not that easy and the choice of the items in stock depends solely on your decision and the evaluation of such factors as the speed of sales and popularity of the item.
While they are kept in stock, the products manufactured in-store should have a certain level of imprest stock to compensate for uncertainties of different nature arising from the work of the company.
If the products are manufactured by other companies, it is very essential to maintain the highest level of the imprest stock system to fill in the safety stock or "gaps" in time and items' amount.
Note that the company should produce as much as it can sell (to meet the demand) plus an amount of items for its imprest stock system to cover uncertainties. It's impossible to limit and control the minimum and maximum levels of the imprest stock, since its value is dynamic and constantly changing.
The main purpose of the imprest stock system is to cover uncertainties that are always present in real industrial activities, and to increase the levels of customer service.
The basic principle of this method is to establish imprest stocks with some minimal level of imprest items. When reaching this level, items will be replenished with new ones, i.e. once the actual amount of the items in stock falls below a certain level, a new order is made to supply this item or product from the manufacturer. The amount depends on the implementation of time requirements (time of delivery or production), the quantities ordered by customers and some other parameters. All this is done to ensure a balance between the cash flow and the amount of stock and to maintain effective functioning of the company.
How to Reduce Delivery Costs?
The imprest stock system allows you not only to keep your items and cash flow balanced, but also reduce delivery costs. By combining several individual items' packages, transportation costs can be cut down significantly. As a rule, the bigger the cargo and the greater the distance is, the lower cost per unit is required to transport the cargo. First, this requires the development of special programs that will allow you to order small loads in bulk. Secondly, when working with foreign companies in e.g. London, UK, all the actions are coordinated between the UK manufacturer and the US buyer in advance, and it is almost impossible to add this or that item to the cargo and you will have to wait until the next shipment. This is where the imprest stock system will be very practical. It ensures the availability of supplies where they are needed. This is done in many different ways. The most common practice is to increase the number of items in stock when you anticipate orders from your customers. Determining the proper amount and the location of warehouses as well as the policy of the safety stock is one of the major challenges in designing the imprest stock system. Many US companies create alternative logistics structures in order to enhance their ability to fully meet the requirements of items in stock that are demanded by customers. A company can maintain two stocks: one stock will provide basic services, and another one will be used as an auxiliary source of supplies. Let's suppose the main stock is a large US automated distribution center in Ontario and another center is a less productive stock in NY, USA. In such circumstances, the company will obviously prefer to send most of its items from the first stock to fully exploit its advantages: automation, performance and location. However, if the main distribution center in Ontario suddenly experiences a shortage of items, the company will always have an alternative center in NY, USA. Companies that have subsidiary stocks make every effort to ensure their customer satisfaction. For example, if the first stock in Ontario can complete only a part of a customer's order, a NY stock will be used to satisfy the remaining requirements.
Maintaining high availability stocks requires careful planning, not just the distribution of stocks in different locations. In fact, the main point here is to ensure availability of stocks for key customers keeping the total gross loans in stocks and storage facilities at a minimal level. This requires the integration of all logistics resources and a clear focus on specific options that are available for specific customers, including online personal loans or payday loans online.
Prediction of the Imprest Stock Balance
Due to the fact that companies produce their annual budget long in advance (at least in a month), there is a need to predict the imprest stock balance for both raw materials and ready-to-go products at the beginning of the year.
If the analysis of the imprest stock dynamics shows that the amount of items is at about the same level in the beginning of each month (this situation can be observed either when the company's activity is rather balanced with maintaining the imprest stock at a certain level, or when "dead stock" is there, which is a common thing for many companies in the USA), then the available data on the stock balance can be taken, for example, based on the previous months of the current year. All this is done to reduce the amount of credit remortgages as well as to improve cost effectiveness and efficiency of the stock.
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The Imprest system is a form of financial accounting system. The most common imprest system is the petty cash system. The base characteristic of an imprest system is that a fixed amount is reserved, which will be replenished at the end of a period or when the circumstances request it. This replenishment is not credited on the imprest account, but from another source. When a sufficient amount is used, the imprest account will never be credited again.[1]HYPERLINK "http://en.wikipedia.org/wiki/Imprest_system#cite_note-1"[2] As such, it can be seen as a permanent debt.
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History
The Stock in Trade System was originally developed as a solution to a computer supplies problem. An important client - a national aggregates company - had delivery problems because a printer had run out of ribbon. Stock in Trade was challenged to come up with a solution to "make sure that this sort of thing never happens again?"' The immediate problem was solved straightaway, by biking a replacement printer ribbon direct from the supplier to the site. But how to make sure it never happened again?
The solution was simple. A price on ribbons in question was agreed then enough stock to cover the customer for a few months was put in place. Every month after that Stock in Trade visited sites, invoiced for items used, and replaced them. The Stock in Trade imprest stock system was born.
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An imprest system is a system using loans as control against fraud and theft. The most common imprest system known is the petty cash system.
Petty cash imprest system
So if you start the month with $100 in your petty cash float and spend $90 of that cash in the month, an amount of $90 will be then placed in your petty cash float to bring the balance of your petty cash float back to $100.
Why use the imprest system
In this example the maximum amount of petty cash that can be issued (spent) is $100. You can only spend what you have and you are only replenished with what you spend, in this case $90.
In a non imprest system where a fixed amount is issued every month e.g. $100 every time cash is required, there is no incentive to ensure all money issued has been documented because when money is all spent a cheque for a fixed amount is issued. It is much more difficult to reconcile a non imprest system as you never know how much exactly should be in the float.
In an imprest system the amount requested is documented. The documentation being the petty cash dockets and their associated receipts or invoices. So at all times you can check how much should be left in the petty cash float by deducting the amount spent from the opening petty cash float.
How petty cash imprest system works
The imprest system ensures that you must document how the petty cash is spent. In a petty cash system, petty cash dockets are written for each amount issued. So when all of these dockets are totalled at the end of the month and deducted from the opening petty cash float, the calculated value must agree with what is left in the petty cash float. Under the imprest system, only that which is recorded as spent is replenished. Any shortfalls may have to be replenished by the guardian, usually a bookkeeper, of the petty cash float from their own personal resources.
Read more: http://wiki.answers.com/Q/What_is_the_nature_of_the_imprest_system#ixzz1HDNnqKNe
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What is petty cash? Provisions (also known as a provisional sum, the international community) is the enterprise, institution, business or other economic organizations, units allocated to non-independent accounting staff within the unit or equipment for the travel, retail purchases, incidental expenses such as use of the funds. Shall designate the person responsible for petty cash management purposes in accordance with regulations, and is not transferable to another person or other purposes. Advance preparation for travel, retail purchases and other equipment used for gold, generally estimated amount required to receive, expend the latter claims, Duotuishaobu. Outstanding before the account may not continue to advance. For the sporadic use of petty cash expenditure, imprest system can be implemented, that is designated in accordance with the provisions of imprest amount of charge collection, disbursement procedures after the reimbursement required to supplement the original quota. Imprest system implementation unit, imprest petty cash disbursement department requisitioned after the expense vouchers should be prepared according to various cost breakdown on a regular basis for reimbursement to the accounting department, and brought back to the disbursement of petty cash. For petty cash advances, can be credited to the appropriation "petty cash" (or "other receivables") subjects the borrower; reimbursement and recovery of the balances credited to the subject of credit. Imprest system in the implementation of the unit, in addition to allocation, increase or decrease the petty cash, through a fixed "petty cash" accounting subjects, the daily disbursement claims make up the scale, they all need not be expended by the subjects and the number of directly credited to the cost accounts, cost of examinations. The approved budget reserve fund units for daily incidental expenses, the need to maintain a certain amount of imprest stock, usually not more than 3 to 5 days to pay the required cash sporadic. The budget unit should be based on unit volume of business, size and amount of incidental expenses to submit applications for petty cash, payment centers according to the budget unit, the applicant and the specific business situation imprest amount of validation, and signed letters of responsibility for petty cash management. Petty cash management unit of the budget reserve funds shall be received by the State Council issued the "Cash Management Regulations" for management, economic exchanges have taken place units, in addition to the scope of the provisions of the cash available, the other should be settled through bank transfer. Petty cash management, including borrowing management and custody management. Management of a petty cash borrowing, business fill in all departments, "petty cash loans single," On the one hand the financial sector to assess the incidental expenses to facilitate management; the other hand, by the following supporting documents to the cash. 2, the various departments scattered petty cash, generally not exceed the prescribed amount, in case the special needs of the enterprise, department manager for approval. 3, the departments should be made sporadic petty cash borrowing an official receipt on a regular basis to the financial sector imprest management (cashier) in the hands, red lent drawings or supplementary provision. Custody of a petty cash, petty cash payments should be set to "petty cash" account, and the preparation of "income, expenditure on the report" sent to managers. 2, the petty cash on a regular basis according to invoices obtained by compiling a list of petty cash expenditures, reflect the petty cash expenditures. 3, the petty cash account should be settled monthly. 4, the cashier should also keep a variety of reserve funds associated with the various instruments. Petty cash management, in any option, the master of the petty cash should be strict, use and reimbursement procedures system. The management of petty cash and non-quota management quota management are two ways. (A) of the quota management quota management is the use of funds according to the actual needs of departments, approved imprest fixed, according to a fixed allocation of cash management. Department with the money expended by the scope of the provisions of petty cash expenditure, after that, with the related expenditure reimbursement vouchers to the accounting department, shown with the accounting department to pay cash, so that petty cash is still consistent with the scale. Generally used for the petty cash expenses, the implementation of quota management approach; give change of use of imprest for sale, Business Libraries group approved by the fixed and allocated to the cash. Money from the sale of the Libraries group often give change to retain the approved models, there is no expenditure and reimbursement issues. (B) non-quota management, quota management is the use of non-money sector according to the actual needs of recipients to the accounting department's management. Certificate by the relevant expenses in the accounting department for reimbursement, as a reduction of petty cash handling, until exhausted. For additional petty cash, and then separate procedures for funding and recipients. Petty cash for the purchase of agricultural products, focused on the acquisition of the peak season in general non-quota management approach, in the off-season acquisition is applied piecemeal approach to quota management, the implementation of replenishment delivery. All in all, no matter what kind of management practices implemented, the recipients must establish petty cash, keeping and reimbursement system and other procedures, and administered by designated person responsible for petty cash. Administered by a change in personnel, must apply for transfer procedures, to clarify the responsibilities. Imprest account, in the "other receivables" account accounting, but also can be set separately, "petty cash" accounts. It belongs to the asset class accounts, increasing the number of registered borrowers, lenders reduce the number of registration, the balance of the reserve fund that the amount of inventory, and in accordance with the recipients breakdown of units or individuals based accounts accounting. Example: A commercial enterprise storage and transportation departments in the economic activities with the petty cash are as follows: (1) by a fixed Management Accounting: By: Other receivables - petty cash - Transportation Department 500 Credit: Cash 500 (2) on non-quota management accounting: By: Other receivables - petty cash - Transportation Department 500 Credit: Cash 5002. Logistics department reimbursement shipping 250. (1) by a fixed Management Accounting: by: Operating expenses - shipping 250 Credit: Cash 250 (2) on non-quota management accounting: by: Operating expenses - shipping 250 Credit: Other receivables - petty cash - Storage transport sector 2503. Transportation department will return the balance of imprest accounting department. (1) by a fixed Management Accounting: by: Cash 500 Credit: Other receivables - petty cash - Transportation Department 500 (2) on non-quota management accounting: by: Cash 250 Credit: Other receivables - Alternate Gold - Transportation Department 250 1 imprest management system design. Set the approval system on which departments and which business of petty cash management, should establish a standard application, the approval system. 2. Quota management system on the department approved the use of petty cash, must be approved in advance as required of a scientific and reasonable petty cash quota. 3. Day to day management responsibility system for petty cash use the department must designate a person management, and clear management of the cash management system must perform, the use of the required permissions to use and spending, acceptance of the accounting department for reimbursement and other management responsibilities and periodic system. 4. Making an inventory system for the accounting department must establish a regular and irregular imprest inventory of the combination, to prevent the misappropriation or misuse of petty cash to ensure the safety and integrity. 5. Review the system of petty cash use sector accounted for reimbursement of all instruments, the accounting department to be the same as for other original documents, only after a rigorous audit of payment account.
