This Simple Mistake Is DESTROYING Your Inventory

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When managing inventory you should keep an eye out for this bad practice that could destroy your inventory forever. I get phone calls all the time complaining about how no matter what the distributor does, their inventory on hand values are always wrong. To the point that they'll do a cycle count and a week later their inventory is inaccurate.

After months of brainstorming, tests and research, I uncovered that the issue lies in how the distributor inputs cycle counts/adjustments into the accounting system. This process in particular had created a100k discrepancy in one of my distributor's balance sheet. In short, they had created a physical inventory count for the day in addition to multiple invoices, credits, and inventory transfers. These transactions were physically created in a sequence. When the distributor went to enter the inventory count into the accounting system, they entered it in the completely wrong sequence. For example:

EXPECTED SEQUENCE
Starting Inventory - 100 Bananas
Invoices - 10 Bananas Sold
Expected Bananas - 90
Inventory Count - 80 Bananas Counted In The Warehouse
Inventory Adjustment = -10
Ending Inventory Value = 80

Actual Sequence
Starting Inventory - 100 Bananas
Inventory Count - 80 Bananas Counted In The Warehouse
Inventory Adjustment = -20
Invoices - 10 Bananas Sold
Ending Inventory Value = 70


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