After your first cycle count is complete, the next step is to try and find causes for any differences in your stock numbers. (If you haven't yet discovered how cycle counting can completely revolutionise your handmade business, you'll want to read this blog post first).

If you find that your stock counts are out a little more than expected, don't dispair: this is a very common scenario when starting out with perpetual inventory tracking so you are not alone. Instead of seeing this as a failure, you'll want to see these differences as opportunities to study your handmade production process and make improvements where necessary.

In order to do this, it's important to firstly work through the common scenarios that can result in stock level mismatches. Stocktake discrepancies can usually be attributed to one of the following 10 reasons:

  1. Your purchases were not recorded accurately
  2. Your vendors sent an incorrect quantity of ordered materials
  3. You lost the stock due to damage when it was shipped to you
  4. You lost the stock due to damage during your production process
  5. You lost the stock due to use by dates expiring
  6. Your stock is in the incorrect location (misplaced)
  7. The stock was mislabelled with incorrect identification
  8. The stock was stolen
  9. There was an error with the stocktake count
  10. There was an error recording your manufacture history (usage of materials)
How to resolve stocktake discrepancies

From the major reasons above, you’ll now want to narrow down to a couple of suspected causes and then work through the troubleshooting guide below:

  • Re-count the stock. This should be your first step if numbers aren’t matching up, as it could be as simple as a miscount.
  • Look for the stock in another location. If you are finding a large number of items missing from your count, they may have been put back in an incorrect place.
  • Check that you have received the stock. You may have marked this stock as arrived when it is still on order from the vendor.
  • For product stock, check if any customer returns have arrived that have not been correctly entered into your inventory system.
  • Ensure that the count has been performed in the same measurement unit you are recording your inventory levels in (i.e. a material is tracked in grams, however the count was performed in ounces).
  • Verify that the SKU or other identification number is correct for the material and that it has not been mislabelled. Check that your inventory management system record matches the actual material you have counted.
  • Ensure that the product is the correc tone.Small differences in variations(i.e. size, fragrance) commonly mean that the wrong product is counted, or that the products are grouped together for the count rather than separated out by variation.
  • Check your inventory management system for any errors with data entry - particularly your purchase and manufacture history.
  • Check for unentered orders or manufactures that could be contributing to the difference. As a rule of thumb, missing manufacture (usage) history will mean your records will be higher than anticipated; missing purchases mean your records will be lower than you expect.
  • Check to see if your previously entered manufactures accurately represent the actual material usage. You can test this by carefully double measuring your next batch of the product and comparing it to the manufacture record to see if there are any major differences that could be attributed to the missing or extra stock.
  • Investigate if there is a possibility of employees or customers stealing stock. This is an unpleasant step to tackle, however is necessary if all other causes have been ruled out already.

Want to learn more about handmade stocktaking strategies?

Stocktaking is much more than just numbers for your tax man: it forms a key part of your entire handmade production process. With a stocktaking strategy in place, you can identify issues and inefficiencies that you may never have been aware of otherwise. This eBook will guide you through the various stocktaking methods, giving you the knowledge you need to create your own strategy.

Topics covered include:
  • Why Stocktake?
  • Periodic vs. Perpetual Inventory
  • Cycle Counting & Sampling Methods
  • Handling stocktake discrepancies
  • Creating good stocktaking habits
  • Stocktaking and Inventory Software


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