Inventory Reconciliation: How to Find & Fix Stock Discrepancies

You just spotted a mismatch between your inventory records and what’s actually in stock.

Maybe a customer order couldn’t be fulfilled… or your numbers looked off during a routine check. Either way, you're now digging through spreadsheets, receipts, and stock rooms trying to make sense of it.

That’s where inventory reconciliation comes in — the process that helps you catch these discrepancies, correct them, and prevent them from happening again.

What is Reconciliation Process?

Inventory reconciliation is the process of comparing your physical stock with what's recorded in your system.

If your records say you have 100 units, but you only find 95 on the shelf... that's a discrepancy — and this process helps you catch and fix it.

It typically involves:

• Physically counting items in storage
• Matching those counts with your inventory system or POS
• Finding the cause of mismatches — whether it's due to theft, human error, damage, or missing paperwork
• Updating your records so your numbers are accurate moving forward

So basically, the reconciliation process is done regularly to make sure your stock levels are correct, your financials are accurate, and you're not losing sales due to stockouts or delays.

What Causes Inventory Reconciliation to Happen?

Inventory reconciliation doesn’t just happen out of habit — it’s done because something doesn’t add up. Here are the top reasons why this process becomes necessary in the first place:

Human Error

This is by far the most common reason.

It usually occurs during receiving, restocking, or transferring inventory between locations. Especially if you're relying on pen and paper, the chances of human error go way up.

If your system says you have 50 units but you only see 47… you’ve got a problem.

Regular reconciliation helps catch these small errors before they pile up and throw off everything from forecasting to order fulfillment.

Inventory Shrinkage

Sometimes, the numbers are off not because of a mistake — but because the items are just gone.

This could be due to theft, shoplifting, employee error, or product damage that wasn’t recorded properly.

For example, if something breaks and gets tossed without logging it out of the system, you’ll still think you have it.

Shrinkage quietly eats into your stock count and revenue... and unless you reconcile, it’s hard to tell where the loss happened.

Poor Returns Management

Returns can get messy fast.

When items come back and they’re not properly scanned, updated, or marked as damaged, your system can show inflated numbers.

Worse, returned stock may sit around unaccounted for, which creates confusion during inventory checks.

This is especially tricky for eCommerce businesses or anyone handling high return volumes.

A weak returns process always results in bad data — and reconciliation is the only way to get things back on track.

How to Properly Reconcile Your Inventory

Inventory reconciliation isn’t just about finding what's missing — it’s about building a habit that keeps your stock, records, and operations aligned. Here's how to do it right, step by step:

Step 1: Count Your Physical Inventory

Start with a clean and accurate count of what’s physically in stock. Use barcode scanners, RFID readers, or even manual counting — whatever suits your setup.

Make sure all items are accounted for, including those in returns, damaged stock, or backroom storage. Don’t rush this... accuracy here sets the tone for everything else.

If you're managing inventory across multiple locations, our Ship from Store feature can help streamline and track movement between branches.

Step 2: Compare Physical Counts with Inventory Records

Next, pull up your inventory system or POS and match what you physically counted against what’s on record.

You’re looking for any mismatches in quantities, SKUs, or stock locations. If there are items without barcodes or serial numbers, double-check them using supplier invoices or past delivery logs.

This is where most issues surface — this step matters.

To make this easier, we offer integration tools that connect your systems and sync inventory data automatically.

Step 3: Identify Any Discrepancies and Find the Cause

If numbers don’t line up... time to investigate. Check:

• Were there missed sales?
• Did an item get misplaced in the wrong bin?
• Was there an unlogged return or shipment?

You won’t always find the root cause — and that’s okay. Don’t spend hours chasing small gaps unless they’re significant. The goal is to understand the pattern, not obsess over every missing item.

Tools like Last-Mile Intelligence and Track help uncover gaps and monitor movement from fulfillment to delivery.

Step 4: Adjust and Reconcile Inventory Records

Once you’ve done your checks, update your system to reflect the actual count.

Even if you can’t figure out exactly why the discrepancy happened, you’ll need to correct the numbers so everything moves forward from a clean slate.

If it’s a system issue, fix the logic. If it’s a process issue, tighten the workflow.

Our Carrier Management platform can reduce issues caused by shipping errors or unlogged order statuses.

Step 5: Document the Reconciliation

Don’t skip this part. Note down what was counted, how the count was done, what mismatches were found, and what adjustments were made.

This keeps your records audit-ready and gives you something to refer back to if the issue reappears next cycle. Documentation is your safety net.

We make this easier through Reports & Analytics and Returns tracking — giving you clean logs and performance visibility.

Step 6: Set a Reconciliation Routine

One-off checks don’t cut it. You should reconcile monthly, weekly, or even daily depending on your volume and business type.

Create a schedule. Assign responsibilities. And always do it before major financial reporting, stock reorders, or end-of-quarter audits.

Consistency is what turns this process into an asset, not a chore.

FAQs

How often should you reconcile inventory?

It depends on your business size and sales volume. High-volume businesses should reconcile weekly or daily, while others can do it monthly or quarterly.

What’s the difference between cycle counting and full inventory reconciliation?

Cycle counting breaks up inventory checks into smaller, scheduled sections. Full reconciliation means checking all inventory at once, typically at the end of a reporting period.

What are the risks of not reconciling inventory regularly?

You risk stockouts, overstocking, financial inaccuracies, and theft going unnoticed. Skipping reconciliation can cost you sales, trust, and operational stability.

Can inventory reconciliation be automated?

Yes — tools like WMS, barcode scanners, and inventory software can automate tracking and flag discrepancies in real time. Manual checks are still needed occasionally for accuracy.

What tools are useful for inventory reconciliation?

Inventory management software, WMS platforms, and barcode/RFID scanners help speed up the process and reduce human error. These tools also sync data across channels and improve tracking.

Wrapping Up

As you move forward, don’t forget that reconciliation is just one piece of the puzzle. If you're looking to streamline your fulfillment, reduce delivery errors, or improve customer satisfaction, we’d love to help.

From shipping automation and carrier management to real-time tracking and returns management, we offer solutions that integrate directly into your current stack — whether you run a retail, e-commerce, or 3PL fulfillment operation.

Feel free to explore our platform features or dive deeper into topics like last-mile delivery, integrations, and customer engagement over on our blog. And if you’re ready to optimize your workflows or just need someone to point you in the right direction, you can always reach out to us directly.

Good luck with your next steps — and we’re here if you need a hand.