The Art of Stock Reconciliation in ERPNext

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Stock reconciliation is the process of verifying and updating the recorded inventory levels to match the actual physical inventory on hand. This reconciliation helps ensure accuracy in financial reporting and identifies discrepancies in stock levels. While it’s commonly done at the end of each month for financial reporting purposes, companies may also choose to perform stock reconciliation more frequently, such as weekly, depending on their specific needs and industry practices.

View this illustration to gain a better understanding of the idea:

You own a convenience store, and each month you make sure your inventory is in line with what your inventory system says it should be.

We call this procedure as “stock reconciliation.”

Stock reconciliation also serves as a watchdog by preventing frauds like inventory thefts, as it helps you identify differences in stock levels.

To carry out stock reconciliation in ERPNext:

  1. Click on New in the stock reconciliation list.
  2. Specify the purpose as ‘Stock Reconciliation’. You can also make changes to the posting date and time.
  3. Choose the item code and warehouse.
  4. After retrieving the current quantity and valuation rate, adjust it as needed.
  5. By default, the “Stock Adjustment” ledger will be set in the ‘Difference Account’ field.

Ensure the posting date and time are set correctly before you submit.

ERPNext documentation on ‘Stock Reconciliation’

Link to LinkedIn Post

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Thanks for posting this. I have a follow-up question on something I am confused about. Let’s say you are going through your inventory and accounting for all the stock you have. If you have at least 1 of such Item in stock, you will be able to update the quantity. But what if you don’t have ANY of that item in stock, how does it get reconciled? For example, it’s one thing if the quantity goes from 20 to 1 units, the system will know to reduce it to 1 because you have encountered only 1 and marked it as such. But if it is 0 units, you don’t encounter any so you don’t know it mark it as 0. Is there a best-practice way for handling this?