Key Takeaway: A system that says you have 40 units and a shelf that has 34 is not a minor inconvenience. It's a signal that something in your process is broken, and it's worth finding out what.
What's on This Page
What Reconciliation Actually Is
Stock reconciliation is the process of comparing your system's recorded quantity against a physical count, investigating any variance, and correcting the system record with a documented reason.
The Process
- Count physically using a stock count sheet
- Compare counted quantity to system quantity for every SKU
- Investigate variances above a set threshold (for example, more than 5% or more than 3 units)
- Document the reason. Theft, damage, miscount, unrecorded sale. Before adjusting
- Adjust the system to match the verified physical count
Common Causes of Variance
- Sales recorded against the wrong SKU
- Stock received but not logged, or logged twice
- Damaged stock removed from the shelf but never removed from the system
- Theft or shrinkage
Key habit: never adjust the system without a documented reason. An unexplained adjustment just hides the same problem until the next count.
Doing this more often, on smaller batches of stock, is far less painful than one dreaded annual count. See Cycle Counting for that approach.
For further reading, see the Association for Supply Chain Management (ASCM).
Checklist
- Complete a physical count using a stock count sheet
- Compare counted quantity to system quantity for every SKU
- Flag every variance above your set threshold
- Investigate and document a reason for each flagged variance
- Adjust the system only after the reason is confirmed
- Log the adjustment and reason for future reference
Common Mistakes
FAQ
How often should reconciliation happen?
As often as counts happen. If you're cycle counting weekly, reconcile weekly rather than letting variances pile up unresolved.
What variance threshold should trigger an investigation?
A common starting point is anything over 5% or 3 units, whichever is smaller, though the right threshold depends on the value of the SKU.
Is it ever okay to adjust the system without knowing the reason?
No. An unexplained adjustment just hides the same underlying problem until the next count catches it again.
What's the most common cause of variance?
Sales recorded against the wrong SKU and stock received but never logged are two of the most frequent causes in small operations.
Calculate This For Your Business
Related Guides in the Inventory Academy
- Cycle Counting. reconciling in small batches instead of one big count
- Inventory Audit Guide. the full audit this reconciliation feeds into
- Why Inventory Mistakes Destroy Small Businesses. another guide in the Inventory Academy