Inventory Discrepancy: Investigation and Resolution Algorithm

Inventory Discrepancy: Investigation and Resolution Algorithm

A discrepancy in a stock count is not always theft. More often it is a data error: a missed receipt, wrong unit of measurement, duplicate write-off. The algorithm below helps find the real cause in 15–30 minutes.

Four Categories of Causes

Before starting an investigation, it helps to know where to look. A negative discrepancy (physical count is below system) is explained by one of four types:

Type	Signs
Data error	One-time discrepancy, explainable by a specific operation; does not recur after correction
Unrecorded losses	Breakage, expiry, internal consumption — usage occurred but no write-off was made
Unrecorded sale	Sale happened physically but was not entered in the system
Theft	Systemic discrepancy on the same items, unexplained by movement history, correlates with specific shifts

A positive discrepancy (physical count is above system) typically means:

• A receipt arrived but was not processed in the system
• A duplicate manual write-off (the same item written off twice when it was only consumed once)
• An error in a previous stock count

Investigation Algorithm

Step 1. Record the Discrepancy

First, complete the stock count in the system — record the fact. You can investigate causes after. Do not postpone completion in hopes of “counting again” — this creates confusion in history.

Step 2. Open Movement History for the Problem Item

Bar → Warehouse → Movement History → filter by item + period from the last stock count to the current one.

You will see all operations: receipts, bar sales, manual write-offs, adjustments. Reconcile the cumulative total:

Opening balance
+ Receipts
− Bar sales
− Manual write-offs
= Expected closing balance

If the expected closing balance matches the system but not the physical count — look for a physical cause (losses, theft). If it does not match the system — there is a data error.

Step 3. Check Receipts

Were there any deliveries in the period that were not processed in the system? Ask whoever received the goods. An unprocessed receipt is the most common cause of a negative discrepancy: goods arrived physically and are being sold, but the system has no record.

Check: compare receipt dates in the system against invoice dates in the folder. Every invoice should have a corresponding receipt in IZI.

Step 4. Check Manual Write-Offs

Were all losses documented? Was there any breakage in this period, expired items, items given to customers? If losses occurred but were not written off — the discrepancy is explained by this.

Resolution: create manual write-offs with actual reasons and dates. At the next stock count this discrepancy will not recur for this reason.

Step 5. Check Units of Measurement

A specific but common error: a receipt was processed in cases (case = 24 cans), but sales are counted in units. Or the reverse.

How to check: open the item card and review the receipt and sales history — does the unit of measurement match? If not — calculate the conversion factor and check whether it explains the discrepancy.

Step 6. Analyze the Pattern of Discrepancies

If steps 3–5 did not explain the discrepancy — look more broadly:

• Which other items have discrepancies? If only one high-value item — more suspicious than small discrepancies across all drinks.
• Which shifts? Export sales and manual operations broken down by staff member. If the discrepancy correlates with one administrator — this is a significant signal.
• How long has it been occurring? If this is the first month after a new receipt with a different unit of measurement — likely a data error. If it is the third consecutive stock count — a systemic problem.

Cause and Resolution Matrix

Cause	Resolution	Prevention
Receipt not processed	Process the receipt retroactively	Rule: invoice = receipt on the same day
Losses not written off	Create manual write-offs with actual dates	Culture of recording: every broken item — write-off immediately
Unit of measurement error	Correct history or item card	Verify at initial item setup
Duplicate receipt	Manual write-off for the excess quantity	Check before confirming a receipt
Sale not registered	Reconcile cash, follow up with administrator	Mandatory use of CRM for all sales
Theft	Written act, discussion with staff member, update access policy	Separate access to warehouse and cash register

Audit Trail for Managers

If the discrepancy is recurring or large:

1. Document in writing — stock count act with signatures (you + shift staff member)
2. Restrict access — temporarily close warehouse access to everyone except the manager
3. Run an unscheduled stock count after 3–5 days — if the discrepancy disappeared, the problem is in specific shifts or staff members
4. Review footage if there is a camera in the warehouse or bar area
5. Modify access rules — who can process receipts and write-offs

After the Investigation

Once the cause is found and resolved:

• Record corrective operations (receipt or write-off) with a clear comment
• Run the next stock count in 1–2 weeks (not in a month) — confirm the discrepancy does not recur
• If the cause was a process issue — update the administrator instructions

Related Pages

• Inventory Procedure — how to run a stock count correctly
• Write-Off: Spoilage and Breakage — how to record losses
• First Goods Receipt — how to avoid errors when receiving goods
• FIFO in IZI — how IZI calculates cost when discrepancies occur