Have you ever wondered what is stock audit and how to do it? Stock auditing is important for businesses that deal with physical products and need to store them somewhere. Companies are tied with vendors who supply them with products that must be stored in the factory outlet or at distribution centres. Post this, the goods are displayed on shelves etc. Companies need to perform periodic checking on the inventory counts of the goods and what is the sale generating percentage of them. As per the Company’s Act of 2013, a set of rules and regulations dictates the auditing process.

what is stock audit

Importance of Stock Audit

A stock audit or inventory audit is done to match the inventory of the goods at the warehouse or distribution center with the registry. Inventory audits are essential for eCommerce or any other retail operations. This is because goods are widely distributed, and it is essential to keep track of them. External auditors or those from the company look into various warehouses and logistics facilities to track the inventory.

Here’s why e-commerce businesses or retail businesses do a stock audit-

  • Inventory audits give a clear report of profits. You can detect which items are missing or misplaced or if the vendor has sent more quantity of a product. This process helps identify the top-selling products, helping you focus on your star items that do well in the market.
  • Stock audits also help improve your finances. You can track the products that are doing well or poorly and accordingly eliminate or add such items. This drastically helps businesses bring in more customers’ favourite products.
  • Inventory auditing also helps keep a check on thefts or fraudulent physical goods hampering. You can check the record inventory registry and the equivalent goods to keep track of them.

Also, read – What is Store Management [Manage Retail Store Efficiently]

how to perform stock audit

Stock Audit Process

The entire auditing process ensures the safety of goods and, ultimately, your funds. You check how to perform stock audit and organise your financial numbers. There is no set process for auditions; however, many auditors adhere to some methods to do the process. Those include-

  • Be prepared and stock up: For small businesses or startups, a day of no operation can bring significant loss in revenue. If you are running out of stock on any product during your inventory auditing, it can be detrimental to your business. Therefore, it is always advisable to stock up a bit on the products before the auditing process starts. This helps you track which products sell fast so you can bring in more quantity of that in the next cycle.
  • Counting the Physical Goods: There are two ways to do this: you can count the items one by one or do a count cycle. A count cycle is recommended for large businesses with over 50 varieties of products to ensure seamless auditing. For home businesses, try to run a spot-check audit. Since these are more close-knit businesses, there are fewer chances of mishaps. You can randomly pick up a few varieties and check the count. If the count matches for the random varieties, likely, the others are more or less accurately tracked.
  • Double-Checking: It might come off as a lot of work, but double-checking is quite useful for the long term. Try to mix and match your auditing methods during the re-evaluation. Alternatively, you can use a QR or UPC for your products. If you are working with large-scale products, hire a helping hand who can assist you in the process.
  • Track the record with the finances: Post the physical counting comes the sale record evaluation. You must compare the findings of the physical product quantity with the sales record. If there are any discrepancies or mismatches of funds, you can check for fraud in that particular product.

Also, read – Which software is recommended for doing Inventory Management

stock audit procedure

Challenges faced during Inventory Audit

Now that you know the stock audit procedure, you must know the challenges that come with it. Every auditor faces some challenges during the process. It can be a minor inconvenience or a major problem. And either way, you can sort it out. Here are some common challenges with stock auditing:

  • Stock auditing is a time-consuming process and needs a proper plan of execution. Make sure you set your auditing time in advance and have ample time for it so that the auditing doesn’t hamper operations.
  • Periodic verification needs to be done for the goods since there is no real-time view of the inventory. Though running monthly audit runs can be too much of a hassle, doing it periodically is essential.
  • Audit processes are not automated and, therefore, need to be done manually. There is software designed for the process that you can check out. This reduces the manual labour that you will need to invest in auditing.

POS System and benefits

Inventory and POS integration harbors a bunch of benefits-

  • Customers can checkout faster since orders are finalized quickly
  • Goods can be tracked accurately, which in turn, makes inventory counting faster.
  • POS inventory management reduces the chances of human error, especially when various logistics outlets are involved in the business.
  • You can check any transaction without a receipt using the system, making the process faster and more efficient.


For every eCommerce/retail company, an audit check is essential for multiple factors. Apart from keeping a proper financial check, it also helps track your best sellers. This ensures that your business runs smoothly, inventory tracking is accurate and no item is getting misplaced. The stock audit helps maintain a stable business, mainly if your products are scattered in various warehouses. Operations through various logistic facilities run better when inventory audits are done periodically.

If you are running a large-scale business, consider hiring auditors. They are professionals and use software to streamline the process. This helps in completing the process faster so that operations can start quickly.