When you run a retail shop or an e-commerce site, you have to keep track of all your inventory. Occasionally, the inventory on your shelves may not match the inventory in your database. To make these numbers match up, you need to do an inventory reconciliation.
How to Do a Manual Inventory Reconciliation
In the beginning, when businesses typically have a small amount of inventory, it’s easy to keep track of the numbers manually. If you have a list of your items in a spreadsheet or even on a piece of paper, you just need to grab that and head to your inventory storage area. Manually go through each item on your shelves, and tick off the items on your list. If you find inventory in your storage area that’s not on your list, add those items to the list. Finally, make a note of any items that are listed in your records but not visible in your storage area. At the end of this process, your records should match your physical supplies.
Digital Tools for Inventory Management
As your business expands and you get more inventory, you may want to invest in digital tools to help with your inventory management. For instance, with cloud-based accounting software such as QuickBooks Online, you can enter details about your inventory, including images and descriptions of individual items. Then, you can sync the software to your point-of-sale system.
As you make sales, your inventory records automatically adjust. You can also run reports to find out which items are selling the best, how much each product is costing you, or other financial details. This process helps you to avoid mistakes, especially when compared to manual inventory management. But, even with digital tools, you still need to do inventory reconciliation on a regular basis, as you may find the occasional discrepancy.
Dealing With Inventory Discrepancies
When you find inventory discrepancies, you need to update your inventory records. Sometimes that means adding items to your database, while in other cases, it means removing items from your database. In both situations, you probably want to figure out why there was a difference in the first place.
If you track your inventory manually, look for math errors. To explain, imagine that your records say you have 20 saris in your shop, but you only have 60 on your shelves.
When you check your records, you see that you started with 100 saris. Then, you sold 40, but you noted the sale twice. That’s why your records say 20 when you really have 60. You just need to adjust the numbers. In other situations, finding errors isn’t so easy.
You may want to go through your invoices and see if they match up with your records. Sometimes, people make sales and issue invoices, but they forget to note the sales in their records. Also, talk with your employees to see if they made a sale that they forgot to put into the system. In some cases, inventory discrepancies may be related to theft. If you think that’s happening, consider installing cameras or taking other measures to uncover theft.
Under the GST system, you have to track your inventory more closely than ever. You even have to track items that you give away as gifts or samples. To make the process as easy as possible, you may want to invest in GST-ready software to help you.