Inventory Reconciliation
Definition
Matching the inventory value in your accounting books to what your inventory system and physical counts say you have, and correcting any differences.
Want a deeper explanation?
If inventory is wrong, COGS and profit are wrong too, because the two move together. Reconciling monthly keeps small problems from becoming a large year-end surprise.
It is one of the most important and most skipped steps in e-commerce bookkeeping. Watch for: large inventory adjustments at year-end, which mean every month before it reported the wrong profit.
Example
Your books show $310,000 of inventory, but your inventory system shows $286,000 at cost. Investigating finds $14,000 of unrecorded damages and a $10,000 receipt entered twice.