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Inventory Reconciling: the Vital Step You Might be Skipping

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When you get serious about inventory, you’ll learn that it’s not enough to simply count what’s in the stockroom. You must also compare that count to your records. The process is known as inventory reconciling, and the hope is that the two numbers match. If they don’t, part of the process is figuring out why there’s a difference and fixing it. That’s why it’s wise to start doing cycle counts, counting stock frequently instead of just once a year. That way, you’ll find errors sooner rather than being faced with a year’s worth of discrepancies later, and all at once.

Step-By-Step Inventory Reconciling

Everyone’s shop is different, but reconciling inventory follows a handful of common steps:

  • First, do a physical count of the parts on your stockroom shelves.
  • Second, compare the results of that count to your records.
  • Third, if there are any differences, figure out the cause. Hint: there may be more than one.
  • Fourth, based on the factors you find in step three, make adjustments to the physical count and your records so they match. Then, take steps to avoid those problems in the future.

Common Reasons for Differences in the Data

It’s frustrating but not unusual a physical inventory count and your records to be different. It might seem the simple solution is to adjust the number in your records to match the physical count. However, that’s the easy way out and won’t solve the problems. You need to figure out the causes for any errors you discover during inventory reconciling so you can fix them properly.

There are many reasons you might find discrepancies when you’re reconciling inventory, but some of the most common include:

  • Human error—someone miscounted, misread a part number, or made a mistake on the unit of measure, like recording one oil filter instead of one case of oil filters.
  • Missing or late paperwork—misplaced receipts or received and shelved parts not yet in the system.
  • Vendor/invoice error—invoices you’ve paid for parts you never received or received parts entered wrong
  • Theft—parts “walk away” with employees or unauthorized stockroom visitors.

Negative inventory is another issue. It usually happens when parts show as received in the system before getting to the stockroom. It can also occur with fast-moving parts that get used before they’re logged in as received. You may not be able to stop negative inventory from happening.  However, reconciling inventory daily that shows up negative will cut down on problems during your less frequent parts counts.

Dealing With Discrepancies

To find human error when reconciling inventory, have a different person do a re-count. For the paperwork problem, enter misplaced or forgotten receipts and invoices. Naturally, if you find vendor invoice errors, you’ll need to back those parts out of your records and contact the vendor right away. However, if you make checking invoices against stock part of your receiving process before paying vendors, you can eliminate that potential problem. Finally, putting a security system in the stockroom as well as using a point of sale (POS) system should cut down theft quite a bit. But you’ll still have to remove parts missing due to theft from the count by entering an expense transaction that takes it off the records.

Use the Right Tools for Reconciling Inventory

With the tools available today, there’s no reason you shouldn’t take advantage of tech for inventory reconciling. Shop management software like Fullbay, for instance, makes reconciling inventory easy. You can access it on your tablet or smartphone. That means you can use it to enter manual-count results directly into the system during cycle counting. That cuts the chances of errors down a lot. Fullbay automatically adjusts inventory whenever parts are used in jobs or sold at the counter. Plus, you can use it to create reports tailored for cycle counts. That allows you to only see the numbers you need to, based on what type of parts you’re counting. And those are just a few of the inventory features Fullbay has. Want to know more? Get all the help you’ve ever wanted with inventory reconciling—just fill in the form below and start using Fullbay today.

 

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