If you’re in the business of selling goods, you’ll know how important good inventory management is for the success of your business. Failing to adequately manage inventory can have dire consequences for your business’s productivity and ultimately, profitability.
Holding too much inventory, for instance, can lead to obsolete stock with valuable cash assets gathering dust on the shelves. In the same way, too little inventory can leave your customers disappointed, when supply can no longer keep up with demand.
Inventory management is a real balancing act – and one way to ensure you maintain the balance is through inventory reconciliation. In this article, we explain the ins-and-outs of inventory reconciliation, how it can affect your inventory management and how it can be used to ensure you make the most of your stock at hand.
What is an inventory reconciliation?
Inventory reconciliation is the process of matching up the stock you have recorded on your inventory records with what you actually have on hand. This process helps you identift stock discprepancies and fix them to ensure they don’t happen again in future.
As a product-based business, your inventory will always be in a state of flux — sales patterns rising and falling according to demand and other factors. This means that your inventory records won’t always accurately reflect how much stock you actually have in real life. This is simply part and parcel of being a product-based business but from time to time, you must ensure you check the similarities and differences between your inventory records and actual stock. Failing to do so leaves you at risk of selling inventory that is, in fact, not actually available. On the other hand, it also leaves you at risk of underselling – mistakenly thinking that you are out of a certain item when in fact, you are not.
This is where inventory reconciliation comes in.
How do you reconcile your inventory, anyway?
While matching your inventory records against your actual stock may seem like a complicated task, it can be broken down into two simple steps.
Step 1: Count your physical inventory
The first step in reconciling your inventory is conducting a stocktake. This can be a time consuming and error-prone task, especially if you are doing it manually, so you may opt to close your doors to the public for at least a day or two depending on the amount of stock to count.
We advise using barcodes and barcode scanning technology to carry out this task, as it will create a more accurate count and is less prone to human error.
Step 2: Compare and contrast
The next step is to match the above count to the count you had recorded previously – and more importantly, to take note of any discrepancies. Once you’ve identified any stock discrepancies, for instance, if there are less of item ‘A’ in your newest count versus the old count, you’ll be able to adjust your inventory records to suit.
In the same way, if there are more of item ‘B’ in your newest count, you can add that to your inventory record and be sure to focus on selling that particular item once the doors open to the public again.
Once you’ve compared your records and actual stock, you’ll be in a better place to sell successfully to your customers. Reconciling inventory in this way is an excellent way to improve your inventory management processes and will lead to a more productive business in general. We suggest regularly reconciling your inventory, every few months or so, to keep your records up-to-date.