Beginner's guide to ecommerce inventory auditsPrecision. In ecommerce and retail as a whole, precision is essential for reducing costs, streamlining distribution, and adapting to market changes on a dime. But with inventory coming and going at all times, how do you keep your sales data precise and up-to-date? Better and more efficient inventory audits.

For beginners and new ecommerce managers, inventory audits may seem confusing or, to some, optional. But if you want to make the best business decisions, you need precise data. So to help beginners get started, this guide runs through the best practices for ecommerce inventory audits.


What is an Inventory Audit?

Technically speaking, an inventory audit is when an auditor (internal or otherwise) counts the inventory. It’s like an all-encompassing stock count.

If your inventory is recorded as a financial asset, an official auditor will drop in to check if your physical inventory matches your records, but in an informal capacity, inventory audits can be conducted in-house at any time to keep sales data up-to-date.


Why are Inventory Audits Important?

Why bother conducting inventory audits on your own? Especially in ecommerce, retail trends come and go as quickly as your inventory.

Regular inventory audits can catch upswings and downswings early on, allowing you to change and optimize your strategies quickly. A certain product selling faster than usual? Raise the price. Not selling as much as it used to? Lower the price.

Regular audits also give you a good backlog of past data to reference and information to help create thorough inventory reports. You can compare sales year-by-year, which can reveal seasonal trends so you’re better prepared next year. Audit data can also allow you to experiment with new strategies or sales techniques; you can more accurately compare before-and-after sales figures based on when the new practice was introduced. You can also better determine future demand and create inventory forecasts with this data.

The actual audit process can be flexible, and even counting boxes yourself on a break can be beneficial. However, as we explain below, some approaches to inventory audits work better than others.


Inventory Audit Best Practices for Ecommerce


1. Consistent, Regular Intervals

First and foremost, your audits are most useful when they happen periodically. This is the best way to collect data, as inconsistent intervals produce inconsistent results.

The minimum recommended interval is once every sales quarter, but conducting them more frequently provides even more accuracy.

As we explained in our previous guide Combat Higher Shipping Costs by Reducing Variable Expenses, if you’re on the ball with your inventory audits, you’ll notice sooner which products should be discontinued. The earlier you conduct your audit, the earlier you can discontinue, saving you more money.


2. Cycle Counts

If you have a large inventory, audits are no easy feat. Not only are they daunting for the auditors, but also they can hold up or delay normal operations. To counteract these effects, many online retailers have adopted the best practice of cycle counts.

Cycle counting staggers the items you audit at different times. For example, rather than auditing your entire inventory on the 1st of the month, instead you audit half on the 1st and half on the 15th. Cycle counting doesn’t impose as much on operations but remains just as accurate as full inventory audits.


3. Buddy System

You know what they say: two auditors are better than one. When dealing with manual counting, you have to consider human error, so having two auditors, each making their own count, is best for accuracy. Send your inventory auditor teams out in pairs.


4. Minimize Shutdown Time

Inventory audits work best when sales operations are shut down. Products sold after the audit began can throw the numbers off, so it’s recommended to pause operations until you’re finished.

Because everything stops, you want to keep the amount of time your audit takes to a minimum, even if you’re using the cycle counting system. The sooner your warehouse runs normally, the better. Here are two time-saving tips:

  • Conduct audits during early morning hours or other slow periods. Pausing operations does more damage during busy hours, so pick the least invasive times for audits.
  • Audit slow-moving products separately. Your low-selling items are less of a priority than your best-sellers, not to mention that their stock levels don’t change as often. You can count these separately, sometimes even without shutting down operations, to save you more time for the main items.


Automated Audits with Ecommerce Software

In every industry, the more mundane and tedious tasks like inventory audits are becoming automated to save employees time — and produce more accurate results. That’s just the advantage of living in the future!

Inventory management software keeps track of each item that comes and goes in real time — the ultimate inventory audit. Moreover, the software automatically updates your listed stock levels on each of your sales channels, so you never have to worry about overselling or meticulously updating product pages.

But inventory management software is more of a complement to audits, not a replacement. We still recommend regular “physical” inventory audits in conjunction with automated ones. That’s why ecomdash includes a Physical Inventory Audit mode — all inventory syncs are temporarily paused so that you can conduct an accurate manual audit.

Beyond the actual audits, ecomdash assists in analyzing the data you collect: restock forecasting, product valuation, and Cost of Goods Sold calculations for tax returns, to name a few extra features. We even record the aisle and bin numbers for quick reference, even across multiple warehouses. If inventory audits intimidate you (or bore you to tears), software like ours can carry a lot of the burden for you.


The Ultimate Guide To Inventory Management for Multichannel Retailers
The Ultimate Guide To Inventory Management for Multichannel Retailers

The ins and outs of managing inventory are overwhelming. That’s why we’ve put together the only guide that covers inventory management basics, accounting methods, pricing strategies, multichannel marketing strategies, and more.

You will receive an email with your download shortly!

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