Inventory Adjustment Tips

While it is possible that your completed inventory count will match the amounts in Quickbooks, it is highly unlikely.  Most of the time you’ll find actual physical inventory is lower than what you’ve recorded.  The technical term for this is “shrinkage”.  It can have many legitimate causes, but it can also indicate theft.  Almost as important as doing the count is determining the reasons for the differences between recorded amounts and actual inventories. 

Of course, once the count is done, you need to reconcile the difference.   You do that using the Adjust Quantity / Value on Hand window.  You get to this window by choosing Vendors | Inventory Activities | Adjust Quantity/Value on Hand.



Once you’ve entered the date, you head for the Adjustment Account field.  Make sure you or your accountant has set up an Inventory adjustment account in your chart of accounts.  If this hasn’t been done, you can always call a Quickbooks Proadvisor for assistance.

Use either the New Qty column or the Qty Difference column to enter the count (depending on how you filled out the worksheet and calculated it). Whichever column you use, QuickBooks fills in the other column automatically.

These changes will post to a number of different accounts, which require more explanation than I’m sure you’d want to read here.  Again, this is where a ProAdvisor comes in handy for a quick explanation tailored to your specific situation. While you are making the adjustments is a perfect time to think about why there are differences in the count and what you can do to reduce them in the future. 

One non-Quickbooks tip I would offer here, is taking time to develop a litle check list of what you're doing to correct inventory, causes of the differences and next step "to-do's". The "slow down" of following your list helps you catch errors, ensures you stick to a systematic approach and is likely to trigger ideas on improving your inventory management. Needless to say your inventory value being correct and well documented also puts you in a much better position if you get audited.

Last but not least, make sure to pat yourself on the back for taking good care of your business as the final step in this process. It's not fun, but it's really worth the trouble.