Don't Let This Happen to You: Inventory Discrepancy
These days inventory tracking is crucial, and maintaining accurate records is considered more critical. If you are facing any inventory discrepancies issues like lost inventory or inventory shrinkage, you need to determine the leading cause behind a discrepancy in the existing inventory. Also, you must know how to save yourself from losses by avoiding differences.
What is an Inventory Discrepancy and Why You Should Care
An inventory discrepancy occurs when the actual physical inventory count does not match what is recorded in the inventory management system. This can be caused by theft, damage, miscounts, inaccurate records, and more. Inventory discrepancies can lead to stockouts, unhappy customers, and financial losses, so it's critical to prevent and resolve them promptly.
How to Prevent Inventory Discrepancies
Here are some tips to help avoid discrepancies:
- Conduct regular cycle counts to verify inventory records
- Use barcode scanners and inventory software to reduce human error
- Establish access controls and surveillance for inventory storage areas
- Provide employee training on inventory procedures
- Carefully inspect all incoming shipments before putting stock away
What to Do if a Discrepancy Occurs
If you uncover a discrepancy:
- Double check records for data entry errors
- Perform a full physical inventory count to identify the cause
- Investigate unusual transactions that could account for the difference
- Adjust inventory records to match the physical count
- Analyze processes to prevent future discrepancies
Consequences of Inventory Inaccuracy
Failing to resolve discrepancies can negatively impact your business:
- Stockouts lead to lost sales and unhappy customers
- Excess inventory ties up cash and incurs carrying costs
- Inability to plan purchases properly
- Regulatory non-compliance risks in some industries
By taking proactive steps to maintain accurate inventory, you can avoid these pitfalls and operate more efficiently.
Recommended: What Is Buffer Inventory & How It Affects Your Business
FAQs
What is an inventory discrepancy?
An inventory discrepancy occurs when the actual physical count of products in stock does not match what is recorded in the inventory management system. This difference is known as a retail inventory discrepancy.
What causes inventory discrepancies?
Common causes include theft, damage/spoilage, miscounts during inventory checks, inaccurate purchase order records, returns processing errors, and more. Both major and minor discrepancies can occur.
Why do inventory discrepancies matter?
Unresolved discrepancies lead to stockouts, lost sales, unhappy customers, inefficient operations, and regulatory compliance issues. Maintaining accurate inventory is crucial for retail success.
How can inventory discrepancies be prevented?
Proactive steps like cycle counting, inventory software, access controls, employee training, inbound inspections, and auditing help avoid discrepancies.
What should you do if a discrepancy is found?
Verify records for errors, perform full physical inventory counts, investigate unusual transactions, adjust inventory levels to match actual counts, and analyze processes.
What are the consequences of inaccurate inventory?
Excess stock ties up working capital and incurs carrying costs, while stockouts result in lost sales. Inaccuracies also prevent reliable sales forecasting and purchasing.
How often should physical inventory counts be performed?
For small discrepancies, monthly cycle counting of high-value goods is recommended. Larger retailers conduct full wall-to-wall physical inventory counts one to two times per year.
Can software help prevent inventory discrepancies?
Yes, inventory management software with barcode scanning improves count accuracy and provides inventory analytics to pinpoint common causes of discrepancies.
