How to do a stock audit in a retail shop: a step-by-step guide

A stock audit answers a simple question: does what is on your shelves match what your records say? For most shops, the honest answer is "not quite". Differences come from billing errors, unrecorded damage, supplier short-deliveries, and sometimes theft. Left unchecked, they distort your profit figures and your reordering.

Here is how to run a stock audit that is quick, accurate, and actually leads to fewer differences next time.

Full count or cycle count?

There are two common approaches:

Full stock count: count everything in the shop at once, usually after closing or on a quiet day. It gives a complete picture, but takes a lot of effort and may mean closing early.

Cycle counting: count a small section every day or every week, so the whole shop is covered over a month or a quarter. It spreads the effort and catches problems sooner.

Many shops do a full count once or twice a year, and cycle counts in between, with fast-moving and high-value items counted more often.

Before the count

1. Pick the time. After closing, or before opening, when no sales are happening.
2. Finish pending entries. Make sure all purchases received, returns to suppliers and transfers are recorded.
3. Freeze movements. No sales, receipts or transfers during the count in the area being counted.
4. Tidy the shelves. Put stray items back in their place, and group identical items together.
5. Divide the shop into zones. Assign each zone to a team of two people.
6. Prepare tools. Barcode scanners or a count sheet per zone, and clear instructions.

During the count

• Count in pairs. One counts and scans; the other checks.
• Go shelf by shelf, left to right, top to bottom, so nothing is skipped or counted twice.
• Count back-stock separately from shelf stock, and label boxes once counted.
• Scan barcodes rather than typing item names, to avoid picking the wrong item.
• Record damaged or expired items separately, so they can be written off with the right reason.

Reconciling the differences

Once counting is done, compare the physical count with the system stock for each item. Sort by the value of the difference, not the quantity, so you spend time where it matters most.

For each significant difference, check the likely causes before adjusting:

• Recount the item. Miscounts are common.
• Check recent purchases for goods received but not entered, or entered twice.
• Check billing for items billed under the wrong code, especially similar products and sizes.
• Check returns and damage that were not recorded.
• Check transfers between stores or from back-stock.

Only after checking should you post a stock adjustment, with a reason for each item. The reasons matter: over time they tell you whether your problem is mainly billing, receiving, damage or loss.

After the audit

• Post adjustments with reasons, and approve them at owner or manager level.
• Write off damaged and expired stock separately.
• Review the items with the biggest differences, and fix the cause, not just the number.
• Schedule the next count, and add problem items to a more frequent cycle count.

Keeping stock accurate between audits

Audits catch problems; good daily habits prevent them.

1. Scan every item at billing. Avoid "misc" items and manual price entry.
2. Check deliveries against the purchase order before accepting them.
3. Record damage and expiry as soon as it happens.
4. Record transfers between stores and from the store room.
5. Review reorder and stock reports weekly, so unusual movements stand out.

Where POS Code fits

In POS Code, every sale, return, purchase and transfer updates stock straight away, so the system figure is always current. For audits, you can count by scanning barcodes, compare physical and system stock item by item, post adjustments with reasons, and see differences by value. If you are still billing by hand, see our 8 signs your shop has outgrown manual billing.

To see a stock audit done in POS Code, book a free demo.