The quick answer
A stock reconciliation compares what is physically present with what your records say should be present at the same moment. A difference is a signal to investigate receipts, sales, returns, transfers, damage or counting errors.
Choose a quiet time and control movements during counting. Record evidence before making an adjustment. Changing the software quantity to match a guess can hide theft, duplicate purchases or an incorrect unit conversion.
Before you begin
- A dated stock list with item codes, units and locations.
- A counting sheet and a way to identify damaged or held goods.
- An owner or authorised reviewer for adjustments.
See how the pieces connect
Freeze
Set the counting time and control movements.
Count
Count each location in the correct unit.
Investigate
Trace every material difference to evidence.
Approve
Record the reason and authorised correction.
Work through the steps
Set the cut-off
Record the exact date and time. Pause transactions where possible, or keep a separate movement log. A receipt entered after counting must not be compared with a quantity counted before receipt.
Count systematically
Work shelf by shelf and include storerooms. Keep unopened cartons and loose pieces separate until converted to the same base unit. Identify unsaleable goods separately from ordinary stock.
Recount differences
Ask another person to recount significant differences without being told the expected answer. Check neighbouring shelves and similar item codes. A misplaced carton should not become an unexplained stock loss.
Trace the movement history
Review opening quantities, purchases, sales, returns and transfers since the previous count. Check duplicate entries and documents saved under the wrong item. Correct an erroneous source transaction through the supported workflow when appropriate.
Approve a documented adjustment
Where a real difference remains, record quantity, reason, evidence and reviewer. A damage adjustment and an unexplained shortage have different meanings. Discuss accounting and tax treatment with your accountant.
Review recurring patterns
Keep the count sheet and adjustment references. Repeated shortages on one item or shift need investigation. Improve receiving, storage and cashier procedures before the next count.
A worked example
A five-unit shortage needs an explanation
Illustrative count after all movements for the day are recorded.
| Movement | Quantity |
|---|---|
| Opening stock | 50 |
| Purchases received | 20 |
| Sales issued | 30 |
| Expected closing stock | 40 |
| Physical count | 35 |
| Difference | −5 |
Expected stock is 50 + 20 − 30 = 40. Recount and investigate the five missing units before recording an approved shortage.
Common mistakes to avoid
- Counting while goods move without a cut-off log.
- Mixing cartons and individual pieces.
- Deleting purchase or sales history to force a match.
- Treating damaged goods as saleable stock.
Questions you might have
How often should I count?
Choose a frequency based on value, movement and risk. Count important items more frequently and perform a complete count at planned intervals.
Does a difference prove theft?
No. Counting mistakes, missing entries and unit errors can cause differences. Investigate before reaching a conclusion.
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Sources and further reading
Official rules and portal screens can change. Use the linked authority for the current requirements; the figures in our worked examples are illustrative.