July 11, 2019      3 min read

For any retail or eCommerce business owner, inventory stock will fluctuate constantly and there is a very real chance that your latest inventory records don’t accurately match your physical inventory stock.

It is important to keep track of all your inventory and it is necessary to undertake periodic inventory reconciliations to ensure that the numbers in the database match the on-hand inventory stock.

Inventory reconciliation

Inventory reconciliation is the process of matching inventory records with the physical inventory stock held in your store or warehouse. The process of inventory reconciliation starts by counting stock to match physical inventory available for sale with recorded stock.

The process of inventory reconciliation also involves the counting of damaged or outdated products and helps to identify the source of inventory discrepancies so they can be addressed. The process helps to improve inventory tracking procedures and prevent theft.

When inventory discrepancies are found, inventory records are updated, or reconciled, to match the actual number of items on hand. This requires creating a stock reconciliation statement that accurately represents your current inventory and means stock items need to be added to or removed from the database.

The inventory reconciliation process

To maintain effective inventory control, businesses need to periodically compare recorded inventory stock against the actual physical stock in the warehouse or retail outlet. If there is a difference between the number of items your records state and the actual stock, you need to find the source of the error and reconcile that difference.

The basic steps of a stocktake and inventory reconciliation process are:

  1. Count your products and compare inventory records with the actual physical inventory. Count items again and double-check that stock numbers on the inventory record have not been misread. Make sure products are in the correct location and have not been misplaced
  2. Check and recheck that you are using the right information and that serial and stock numbers match the items being counted. Check that records are up-to-date and that all sales have been entered into the system and all invoices have been accounted for
  3. Compare the results to identify and address any inventory discrepancies. These can occur due to inventory waste through spoilage, damage or obsolescence but can also result from theft or supplier fraud
  4. Reconcile inventory records, adjusting figures so they match physical count. Even if no explanation for the discrepancy is found, it is important to have an accurate record of your inventory stock, so it is accurately reflected in financial reports
  5. Compare results with previous inventory reconciliations to determine if discrepancies are decreasing over time or to identify patterns so you see if your inventory control practices are working

Inventory control

Inventory reconciliations help businesses to determine the issues that are causing shrinkage and allows them to implement processes to prevent them. Optimise inventory control, to reduce the risk of inventory discrepancies by taking the following steps:

  1. Organise your store and ensure stock items are easily located and in their proper place, clearly labelling boxes and shelves to avoid confusion
  2. Minimise the risk of human error by introducing the right technology. Barcode scanners and RDIF devices improve inventory control and help reduce the risk of counting errors when undertaking an inventory reconciliation
  3. Implementing a POS system that tracks sales and integrates with online inventory management software to automatically update inventory levels in real time, every time a sale is made
  4. Streamline inventory reconciliation through cycle counting to streamline the process of reconciling inventory. Grouping products into categories reconciling one category at a time and systematically counting through every single product on a continuous basis
  5. Invest in digital tools to help optimise inventory control. With online inventory management software, you can enter detailed information about your inventory into the system and sync the software to your POS system

Getting the right online inventory management solution to deal with the intricacies of inventory reconciliation will save you time automatically adjusting inventory records as sales are made.

Automation helps avoid mistakes, specifically when compared to manual inventory control. However, even with digital tools, inventory reconciliation should still be undertaken on a regular basis, as occasional discrepancy can occur and all other processes running well, may indicate shoplifting or theft.

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