Inventory Counting: A Guide to Preventing Stock Losses

Many business owners look at inventory as goods and nothing more. In truth it is liquid cash that has taken the shape of products. Every unit missing from those products is a direct deduction from your net profit. Stock shrinkage can come from theft, from damage, or from human error when invoices are entered. Counting is not simply tallying units. It is a reconciliation between physical reality and what the accounting system says, and it is what keeps the company's financial position sound.

With Snad you are running perpetual inventory automatically: every sale deducts from the warehouse and every purchase adds to it. That still does not replace the periodic physical count. Why? Because the system has no way of knowing that a unit was broken in the warehouse or went missing. We advise companies to run a full count once a quarter, plus a weekly spot count (cycle counting) on their highest-value items.

Before you begin, freeze all warehouse movement — no sales and no purchases. Pull the count sheet out of Snad; it lists item names and their locations (sometimes without showing the book quantity, so that staff count honestly). The team counts the units by hand, then the actual quantities are entered into the system. Snad automatically compares actual against book and produces a variance report showing the shortage or the surplus.

Small variances — 0.5%, for example — can be acceptable in some industries, the result of measurement error or normal spoilage. Large variances call for an investigation. Is someone manipulating the warehouse? Or were purchases never entered? Snad helps you trace item movement: you can see every invoice that brought the item in and every invoice that took it out, which makes it far easier to find the missing link and assign responsibility.

Once the count is complete and the results are approved, you post an inventory adjustment. In Snad this runs through an automatic journal entry that reduces the inventory value on the balance sheet and carries the loss to cost of goods sold or to a stock shrinkage loss account. This step is essential. It is what keeps your year-end profit reports real, instead of optimistic figures built on goods that were never there.

1. Use barcodes for everything; manual entry is the first enemy of accuracy. 2. Organise your warehouse clearly, shelf by shelf and aisle by aisle, and record those locations in Snad. 3. Do not wait for year-end; a surprise count on selected items is the best control you have against manipulation. 4. Put the count in the hands of a team other than the warehouse team, so the result stays neutral.