No matter how tightly you manage your warehouse, reality and software eventually drift apart. Items break. Shipments contain miscounts. Theft happens.
The Stock Adjustment module is the mechanism for correcting your digital stock levels so they perfectly match the actual physical count on your shelves — while keeping your accounting perfectly clean.
Why Adjustments Are Critical
You can’t just “change the number” on an Item profile — that would be invisible to your books.
When stock disappears, it has a financial value (COGS). If a $50 jacket is stolen, your business didn’t just lose a jacket — it lost $50 in assets. A Stock Adjustment creates the proper journal entry to move that $50 from your “Inventory Asset” account to a “Loss/Shrinkage Expense” account, ensuring your balance sheet is accurate come tax time.
Performing a Stock Adjustment
Whether you’re doing a massive year-end physical count or just writing off a single broken coffee mug, the process is the same.
Create the Adjustment
Navigate to Inventory > Stock Adjustments and click New Adjustment.
Select the Type
Choose the reason for the adjustment:
- Quantity Adjustment: The physical count doesn’t match the system (e.g., correcting shrinkage or miscounts).
- Value Adjustment: The quantity is correct, but you need to devalue the item financially (e.g., writing down seasonal apparel for clearance, or noting damage that reduces worth).
Define Details
- Date: When did the physical count or damage occur?
- Reference Number: An optional field to link this to an external count sheet or incident report.
- Reason / Description: Explain why the adjustment is being made (e.g., “Cycle count — Section A”).
Expense Accounts: The system needs to know where to post the financial impact. By default, quantity reductions go to a “Shrinkage” or “Inventory Loss” expense account. You can override this if the loss was due to a specific event (e.g., a “Flood Damage” expense account).
Warehouse Selection: Running multiple warehouses? Each item row in the adjustment table has its own Warehouse column — select the specific location for each item individually.
Add Items & Variances
For a Quantity Adjustment:
- Search and add the affected item(s).
- Look at the Current On Hand value the system provides.
- In the New Quantity physically On Hand field, type the actual number you counted.
- (e.g., System says 10. You counted 8. Type “8”. The system calculates a “-2” variance automatically.)
Finalize
Review the total financial impact of the variance at the bottom. Add any necessary notes (e.g., “Found behind desk during cycle count”), and click Save.
Stock levels update instantly, and the backend journal entries are logged automatically.
Best Practices for Cycle Counting
Skip the painful week-long warehouse shutdown every December. Instead, adopt Cycle Counting:
- Count a small, specific subset of your inventory every week (e.g., “Section A” on Monday, “Section B” on Tuesday).
- Use the “New Quantity physically On Hand” input method during these counts. This keeps high-turnover items exceptionally accurate without disrupting daily fulfillment.