What is meant by inventory reconciliation?

Inventory reconciliation refers to the process of adjusting inventory records to ensure that the recorded amounts match the actual physical stock on hand. This is crucial for maintaining accurate financial statements, managing supply chain efficiency, and preventing issues like stockouts or overstock situations. By performing inventory reconciliation, a company can identify discrepancies that may arise from errors in data entry, theft, damage, or miscounting, and take corrective actions to update their records accordingly.

This process plays a vital role in ensuring that a company has a clear understanding of its inventory levels, which directly impacts its operational efficiency and financial accuracy. Proper inventory management can help streamline operations, minimize costs, and enhance customer satisfaction by ensuring that the right products are available when needed.