If either A or B is inaccurate, the formula will produce a number that isn’t useful and should be discarded.
Inventory Accuracy Best Practices
A 2008 study found widespread inaccuracies in the inventory records of retailers despite the cumulative billions being spent on automated tools to make stock replenishment and other tasks more simple.
In order for inventory counts to be correct, they must contain the following details:
- Quantity on hand
- Location of inventory
- Unit of measure (single items, multipacks, etc.)
- Unique product number or identifier
If any of these is missing or is inaccurate, the formula will be thrown off and can’t be calculated correctly. Inventory management systems can be used to collect numbers electronically and aid in ensuring accuracy.
It should be noted that calculating inventory accuracy is different than calculating finished goods inventory. Both are important numbers to have on hand, but serve very different purposes.
Businesses without plans to regularly calculate inventory accuracy risk product outages that can negatively impact their reputation among customers. Don’t get caught with inaccurate inventory numbers that can hurt their sales and profits.