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Due diligenceExpert answer · 1 min read

How do I check how a warehouse handles damaged and returned goods?

Follow a damaged item and a return through the building. Check where it is received, who inspects it, how it is recorded, where it is held and what decides whether it is restocked, repaired, credited or discarded. Review the logs and the credits issued to clients.

Damaged and returned goods expose weak process fast. Start with a walk-through. Is there a defined area for these items, or do they sit in aisles? Is each one tagged, photographed and entered in the system, with a reason recorded?

Review the logs from recent months. Look at volumes by client, by type of damage and by who found it. Damage at receiving, in storage and at shipping point to different problems. Check how long items wait before a decision, since stalled returns tie up space and cash.

Ask who authorizes credits, write-offs and disposal, and how clients are informed. Read a few client disputes to see how the warehouse documented its case. Ask what insurance covers and what does not, and how claims were settled. Finally, ask your accountant how loss and write-offs appear in the books. Records that match the physical process are a good sign. Ask also how clients are told about damage, because quick and clear reports keep trust where silence erodes it. Ask what portion of returns is resold or reworked, and how that decision is made. Look at the area where rejected goods wait, too, because crowded corners often reveal how long decisions really take.

Key takeaways

  • Follow one damaged item and one return from receiving to final decision.
  • Check logs by client and damage source, and how long items wait for a decision.
  • Find out who approves credits and write-offs, and how disputes were documented.

Sources

This answer is checked against primary sources. Links were last confirmed on the dates shown.

  1. 01
    Business Development Bank of CanadaGovernment
    What are the steps to buying a business?
    bdc.ca·Checked Oct 21, 2026
  2. 02
    Business Development Bank of CanadaGovernment
    How to conduct due diligence when buying a business
    bdc.ca·Checked Oct 21, 2026

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