Inventory Audit Form, With Test Counts and Cut-Off Checks

An inventory audit checks that your stock records can be trusted, not only that one count was right. It does three things a normal count doesn't. Test counts run in both directions: from the books to the shelf, to find things recorded that aren't there, and from the shelf to the books, to find things there that aren't recorded. Cut-off checks look at the deliveries, shipments and batches either side of the count date, because a delivery counted but booked next month makes both months wrong. And cost checks compare the cost on the books with the supplier's invoice for the items worth the most. In the example below, ten test counts find eight lines that match and two that don't: two tubs of purée pulled for testing and never recorded, and six packs of poi from a batch nobody entered, which the cut-off check also catches. Below is how to run the audit, the example, the checklist, and a free form.

The short version

• Test counts both ways: books to shelf finds missing stock; shelf to books finds missing records.
• Pick test lines with judgment: the most valuable items, anything with a recent problem, and a few at random.
• Check cut-off: the last and first receipts, shipments and batches around the count date.
• Check costs against invoices for the items that matter most to the stock value.
• Set aside and value expired, damaged and held stock.
• Enter missing records with their real dates before adjusting what's left.
• TaroStack keeps a permanent record of every movement, which is what an audit needs most. More below.

How to run the audit

For a full count, rather than test counts, see year-end inventory count, and for working through every difference once it's found, inventory reconciliation template.

A worked example

Windward Roots, the made-up taro business I use in these examples, audits its stock at the end of October with ten test counts, five each way:

The two tubs of purée were pulled for a shelf life study and never recorded as samples; how such a study is run is in shelf life study template. The six packs of poi came from a batch made on October 30 that nobody recorded, which the cut-off check found too. Neither would have shown up in a count from one direction only: the purée only from the books, the poi only from the shelf.

Cut-off and cost checks

Cut-off errors are the quiet ones: a delivery that arrived on the 31st but was booked on the 2nd puts the stock in October's count and the cost in November's books, so October's profit looks better than it was and November's worse. How cost and value come together is in what is inventory valuation.

The checklist

1. Count day set, and movement stopped or every movement during the count noted.
2. Counters given sheets or devices, by area, with units shown.
3. Test counts drawn both ways.
4. Every difference recounted by someone else.
5. Cut-off checked for receipts, shipments and batches.
6. Costs checked against invoices for the items worth the most.
7. Expired, damaged and held stock found, valued and set apart.
8. Missing records entered with their real dates, then remaining differences adjusted with a reason.
9. Stock value compared with opening value plus purchases less cost of goods.
10. Findings written up, with what changes next time.

Get the form

Download the inventory audit form. Three sheets: test counts both ways with each difference valued and a match rate, cut-off and cost checks, and the checklist. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.

Where this stops working

An audit is only as good as the records it tests. If movements are written down on paper and typed in later, the books are a reconstruction, the cut-off is a guess about which day something was typed, and nobody can say who changed a quantity or why. The audit finds the gaps; it can't fill them.

How TaroStack does it

TaroStack keeps the record an audit tests: every movement, with who, when and why.

A permanent record of every movement. Receipts, batches, sales, shipments, transfers and adjustments are each a permanent record of who, when and why. An adjustment carries its reason, such as sample, damaged or expired, so the two tubs pulled for testing are recorded as samples, and corrections are recorded as corrections and can be undone, rather than overwritten.

Counts and value on the record. Counting works on a phone, tablet or printed sheet, with no signal, shows what each difference is worth before you post it, and suggests what to count first. Stock value by site and by month comes from FIFO cost layers, including freight and other landed costs, and held, quarantined and damaged stock sits apart from what's available.

And everything exportable. Every list exports to CSV, so an accountant or a lender can test the records in their own tools, and lots carry their dates, so expired stock is found by the records, not only by eye.

Counts, adjustments with reasons, stock value and CSV exports are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.

Questions people also ask

How do you audit inventory?

Test count in both directions, recount every difference, check cut-off around the count date, check costs against invoices, set aside expired and damaged stock, enter missing records, adjust what's left, and compare the stock value with the period's purchases and cost of goods.

What is the difference between an inventory audit and a count?

A count finds what's on the shelf. An audit tests whether the records can be trusted: test counts both ways, cut-off, costs and the value, with the findings written up.

What should an inventory audit form include?

Test count lines with direction, item, lot, location, book and counted quantities, the difference and its value; cut-off checks with documents and dates; cost checks against invoices; and a checklist to sign off.

Why test count in both directions?

Counting from the books to the shelf finds stock that's recorded but missing. Counting from the shelf to the books finds stock that's there but was never recorded. Each finds what the other misses.