Why your stock figure is wrong, and what it costs you

The monthly surprise

Ask an operations manager what is on the shelf and you will usually get two answers: what the system says, and what they believe. The gap between those two numbers is treated as a fact of life, absorbed into a monthly stock-take and a set of adjustment entries that nobody enjoys making.

It is worth asking why the gap exists at all, because in most companies it is not a counting problem. It is an architecture problem.

If the sale and the goods-in are recorded in two systems, the stock figure is a reconciliation, not a fact.

Where the gap comes from

A typical growing business books sales in a CRM, raises invoices in an accounting package, receives goods against a purchase order in a spreadsheet, and moves stock between locations on a WhatsApp message. Each of those is a reasonable local decision. Together they guarantee that no single record knows the whole story of a single item.

• Sales committed but not yet dispatched are invisible to purchasing
• Goods received are entered days later, if the paperwork survives the journey
• Returns and damages are adjusted at month end rather than when they happen
• Transfers between locations are recorded in one place and not the other

What it actually costs

The visible cost is the stock-take itself. The larger cost is everything decided on a number that was wrong: the order placed for material already on the shelf, the delivery date promised on stock that is committed elsewhere, and the margin calculated on a valuation that never included freight.

Closing it

The fix is unglamorous: put the sale, the purchase, the receipt and the movement on the same record, so that the stock figure is a consequence of transactions rather than a periodic negotiation between systems. That is the whole argument for one product over several integrated ones, and stock is where it shows up first and most expensively.