Business readiness

Inventory Reconciliation Report

What is an Inventory Reconciliation Report?

A report that documents the results of a physical inventory count and lists all of the adjustments that need to be made to this figure to obtain the Inventory figure in the company's accounts.

An inventory reconciliation report provides a comparison between the written inventory records of the business and the actual physical stock held in storage. To the extent that these figures do not match, the report can help to identify the source of the error.

If the source of the discrepancy cannot be found, the written inventory records should then be amended to reflect the actual inventory level and the appropriate accounting entries made.

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Why is an Inventory Reconciliation Report important for business today?

Performing an inventory reconciliation helps your business today through the following benefits:

  • Ensures your written records for inventory figures are accurate by aligning the written records to those obtained via a physical check
  • Ensures all types of inventory are being separately recorded and included within the written figures
  • Will help improve your inventory tracking procedures and prevent theft
  • Provides a starting point for investigating any discrepancies with staff and suppliers through the identification of the source of any discrepancy either by product type or location
  • Helps to benchmark the business in terms of rates of stock-loss relative to industry benchmarks

Why is Inventory Reconciliation Reports important for an event tomorrow?

An inventory reconciliation report is one of a number of reports that provide investors with confidence that:

  • The reported figures do indeed line up with the physical reality
  • Management have robust internal procedures for reconciling the accounts and identifying and addressing any discrepancies that arise

In addition, the inventory reconciliation report allows potential investors to compare the performance of the business in terms of stock-loss rates against industry benchmarks to determine whether this may be an area of future improvement and a potential source of future value.

Pros of addressing Inventory Reconciliation Reports

  • Ensures accurate written inventory records
  • Improves inventory tracking
  • Helps identify where any discrepancies are coming from
  • Allows comparisons with industry benchmarks for inventory management

Cons of not addressing this topic

  • Higher likelihood of inaccurate inventory metrics reported in financials
  • Higher likelihood of stock loss from the business not identified and that it continues to go unnoticed
  • Unable to identify the cause of any stock loss
  • Unable to compare the performance of the business against industry benchmarks

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