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Causes of stock discrepancies and how to prevent them

Maintaining accurate inventory is crucial in the world of retail. Discrepancies in stock levels can significantly impact profit margins and customer satisfaction. Understanding the impact of inventory inaccuracy is essential for businesses looking to optimise their operations. This blog dives into the various types of discrepancies that can occur in inventory management and provides practical strategies to prevent them. By addressing the root causes of stock discrepancies, businesses can enhance efficiency and maintain more accurate inventory records.

What is a “Stock Discrepancy”?

A stock discrepancy, often referred to as inventory inaccuracy, inventory discrepancy, or stock variance, is the difference between the recorded stock levels in inventory management systems and the actual inventory on hand. This issue poses various risks, including lost sales due to out-of-stock situations, inaccurate financial reporting, and inefficiencies related to overstocking or understocking. 

It is also a widespread issue that can lead to significant financial losses for businesses of all sizes. If it persists, it can be frustrating and very expensive.

Types and causes of stock discrepancies

Identifying the types and causes of stock discrepancies is critical for developing effective solutions. Here’s an explanation of why they are a problem:


Shrinkage, a major factor contributing to stock discrepancies, encompasses inventory loss from several sources, including shoplifting, employee theft, fraud, and damaged goods. 

Shoplifting is the most visible form of shrinkage. Preventative measures such as security tags, surveillance cameras, and trained security personnel are often employed to deter shoplifters.

Employee theft can be more challenging to detect than customer shoplifting because employees have greater access to inventory and may understand the security systems in place. Strategies to combat it include rigorous screening during hiring, regular audits, and fostering a workplace culture that emphasises integrity and transparency.

Fraud affects stock levels and can also distort financial reporting, leading to further complications in management and auditing. Advanced point-of-sale systems and robust internal controls are crucial in detecting and preventing fraud.

Misplaced stock or wrong location

When items are present in a store or warehouse but are not logged in their correct locations within the inventory management system, the effects can be as severe as if the items were missing entirely.

Such discrepancies can disrupt sales, delay restocking, and lead to inefficiencies in inventory management, negatively impacting business operations and customer satisfaction.

Poor returns management

Inefficient processes for handling returned goods can cause discrepancies. When customers return items, these goods must be accurately accounted for and reintegrated into the stock.

However, if these returned items are not promptly and correctly processed, it can result in mismatches between the physical inventory present and the inventory records in the management system.

Human error

Mistakes during manual inventory data entry, miscounting items, or misunderstanding inventory reports can lead to significant variances. Human error is inevitable in manual processes, making it a common cause of inventory inaccuracy. Enhanced training and the implementation of double-checking procedures can help reduce these errors, further ensuring inventory accuracy.

Outdated inventory systems

Using antiquated systems can exacerbate stock discrepancies. Older systems might not integrate well with other technologies or may not be equipped to handle the volume or complexity of modern inventory tracking, leading to inaccuracies.

How to prevent stock discrepancies

Preventing stock discrepancies involves implementing strategic measures to improve accuracy and reduce errors, which can bring many benefits. Here are the top effective strategies to keep in mind:

Update your inventory management system

Investing in a modern inventory management system can significantly reduce discrepancies. Such systems automate data entry and inventory tracking, enhancing accuracy and minimising the likelihood of human errors.

Conduct regular inventory audits

Performing regular physical inventory counts helps detect discrepancies early, allowing businesses to adjust their records and promptly investigate the causes of mismatches.

Improve security

Implementing security measures such as cameras and access control systems can deter theft and reduce shrinkage, addressing one of the key contributors to stock discrepancies.

Invest in staff training

Ensuring staff are well-trained in proper inventory handling procedures—including receiving, stocking, and conducting physical counts—is crucial. Educated employees are less likely to make errors that lead to inventory discrepancies.

Tackle stock discrepancies with Trust Payments

Businesses can significantly improve their operational efficiency and accuracy by identifying the causes of inventory discrepancies and investing in preventing them. 

Embracing strategies such as updating inventory management systems, conducting regular audits, enhancing security, and investing in staff training, coupled with dedicated software features, are essential to minimise stock discrepancies. 

With Trust Payments’ Inventory Management software, businesses can leverage advanced technology to maintain accurate stock levels and enhance profitability. Remember, an accurate inventory is not just a goal—it’s a cornerstone of successful retail management.

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