If you discovered you only had $100 when you thought you had $1,000, you’d be alarmed.
If you run a business that sells physical goods, this same sentiment applies when you have a discrepancy in your actual inventory counts versus what you thought you had.
Managing inventory is plays an essential role in supply chain management, but it isn’t always easy. That’s why retail businesses must consistently track inventory records at the SKU level.
Even if you have a good track record with inventory accuracy, there are key things to consider to keep it that way. Read on to learn more about inventory accuracy and how to improve it.
Inventory accuracy refers to any inconsistencies between the actual quantity or type of physical inventory and what is recorded or is supposed to be. In most cases, it is the difference between what’s recorded in an inventory management system and what you have available for sale in a store, warehouse, or storage location.
Inaccurate inventory is obviously problematic as it can translate to incorrect customer orders, a shortage of product, theft, damages, loss for your business, or even trouble selling through what you have before it becomes obsolete.
But there are also implications on the accounting side that can cause more trouble for a business.
For example, inaccurate inventory can lead to inventory shrinkage when stock is less than the recorded balance in accounting records and can throw off your inventory valuation at the end of a financial year or accounting phase.
Inventory write-offs are when you remove or reduce the value of inventory or dead stock that has no value from their accounting records and can be used to rectify inaccurate inventory.