How to do Inventory Reconciliation the right way?

Inventory Reconciliation

The goal of inventory reconciliation is improving product quality and increasing the amount is to quickly sell in the market. Moreover, today the competition is so tight, that business people are competing to make the latest innovations. However, sales are helped by the existence of e-commerce, making it possible to increase up to 200%.

However, this is not the benchmark for a company to successfully run its business. Even though sales are increasing, losses can occur due to a lack of inventory management.

Inventory is the main asset of a business and is a binding investment until the goods are sold or used in production. As for what is included in its management, namely the cost of maintenance, insurance, to the value of the goods. If it is mismanaged, it will cause financial problems for the business.

What are the techniques to maximize the inventory reconciliation?

The first step in its management is to find responsible and competent human resources. Those who are experts in their field will have a clear picture of inventory and can manage things better.

Those who are responsible and competent can manage and work on inventory more systematically and regularly. The job desk carried out in this field includes adjustments, managing returns, validating items received, and implementing inventory reporting strategies.

Now, let’s discuss the most appropriate way to do inventory reconciliation. When you do reconciliation, you must pay attention to the following things which of course can be in addition to the methods that you have applied previously.

Stock Calculation Method

According to stock exporters at, counting stock is one of the first steps in inventory reconciliation. By doing a stock calculation correctly, then you already have a strong foundation to the next stage.

You can’t just ignore stock calculations even though they seem to be repeated many times. We cannot over-stress how important this is in comparison to the rest. You may be confusing technical issues, but rest assured that inventory reconciliation is really a matter of calculation. So, make sure your calculation technique is correct.

So far there are 3 ways to do inventory reconciliation. Of these 3 ways, each has its own advantages and disadvantages.

1. Cycle Counting

Cycle counting is a method of stock calculation that is carried out periodically. All you need to do is go to the warehouse and check the quantity of goods in it under supervision. You can do this for certain periods such as 4 times a year.

Check out How Cycle Counting works and what are the steps in cycle counting here.

The purpose of cycle counting is actually to reduce the annual counting burden which will require massive manpower and personnel. Sometimes, to do your annual counting, you have to stop the production process for a while and this can be counter-productive.

2. Annual Stock Count

This is one of the most common methods, but also the least effective, although this method is fairly standard. Yes, the annual stock count method is one method that is often used for inventory reconciliation because of its ease of providing clarity about inventory. In addition, this method also allows for several other things that make inventory better.

One of the advantages of the annual stock count is the certainty of counting goods every year so that no items are missed. Another thing that makes Annual Stock Count still practiced today is that it is not complex.

You only need to count the number of incoming goods this year along with outgoing goods and the profit earned, that’s all.

3. ABC Analysis

ABC Analysis is somewhat more complex. This method relies on the Pareto Distribution principle where most of your profit comes from a small portion of your goods. Yes, instead of bothering to inventory all items, you only need to do it for a few priority items.

You need to create groups A, B, and C (hence the name ABC Analysis) where A is the best selling product group. B is a product group that is in demand but demand is limited or seasonal, and C is not in demand.

After the group is created, you only need to prioritize inventory reconciliation against profitable groups such as A and B. Meanwhile, you can leave group C if you don’t have time to take care of it. This way, your efforts will not be wasted on things that is not profitable to you.

4. Updating the Differences in Stock Database

The difference in the amount of stock is unavoidable. Although SKU plays an important role in product identification, there are many things in its implementation that will create a difference in stock counting. Therefore, you will need special techniques to deal with this inevitable difference.

So, how can you handle this difference? It’s all about statistics. Make sure you record this discrepancy well and do the calculation of variance and errors contained in it. This is a concrete step you can take instead of finding out where the differences come from.

Inventory reconciliation Constraints

Inventory Reconciliation Constants

When you do Inventory reconciliation, there will be several things that you will face as follows.

1. Chaos activity

You must be able to manage various activities that are happening so as not to technically interfere with the inventory reconciliation process.

2. Data collection

Never rely on spreadsheets because the technology can no longer be used for complex, large numbers of calculations. You will encounter many technical problems if you use it.

3. The flow of goods

You must stop the flow of goods in and out for the reconciliation process to work well.

The Best Way to Inventory reconciliation

The best way you can do is to use the Advanced Inventory reconciliation method. This is a method that can standardize the process and also get maximum results that you cannot get from conventional reconciliation.

However, you can ask a third party to assist you in this process. One third party you can go to is, a software that contains Stock take and Stock Adjustment and keep your inventory up to date.

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