Originally published on April 22, 2022
Last updated on March 6, 2026
Understanding the Inventory Audit Process
Conducting an inventory audit can seem confusing at first. Fortunately, knowing what to expect and how to break it down will have you stock auditing like a professional in no time. There are steps you can take before and during the process to simplify it for you and your business and limit the disruption it […]
Conducting an inventory audit can seem confusing at first. Fortunately, knowing what to expect and how to break it down will have you stock auditing like a professional in no time. There are steps you can take before and during the process to simplify it for you and your business and limit the disruption it has on your workflow.
What Are Inventory Audits?
Completing inventory audits is an essential part of your business’ workflow. During an inventory audit, the financial records from a certain period of time are cross-checked with the inventory records from the same time. This will reveal any discrepancies in inventory or finances.
Often, inventory audits are time-consuming and taxing on your employees, as they have to go through every item in your warehouse and count several times to come up with the correct number. It’s often helpful to bring in a third party to confirm even further that the number is correct. These audits are well worth the investment, as they help you identify any instances of theft, damage or misplacement that have occurred over the period of time you’re analyzing.
These audits are mandatory by law for public companies that have an inventory of material goods.
The Inventory Auditing Process
There are a variety of inventory auditing methods you can choose from based on what your business does and how your workflow functions. The main goal of inventory audits should be to collect accurate and current data that’s backed up by multiple sources.
The approaches to your inventory counts can be broken down into two main methods — physical counts and cycle counts.
Physical Counts
These counts are the process of counting your inventory wall-to-wall. Since doing so is such a considerable task, it’s typically taken on once a year around the time your business’s financial statement is ending. Note that your team will have to plan for physical counts, as you’ll need to halt operation until the number is finalized, which could take some time depending on the size of your business.
Once you’ve come up with a final number, you’ll compare it to the inventory number in your system. This allows you to see and work toward fixing any discrepancies.
Cycle Counts
The cycle count method is a partial count, sampling a small portion of your inventory on a regular basis. Though a once-a-year physical count should still be part of your process, performing cycle counts often help the physical count go more smoothly and quickly.
These counts break down further into several different ways to accomplish them:
ABC analysis: Also known as a high-value item inventory analysis, ABC analysis helps you manage your warehouse better by grouping products in order of value — high-value items are “A” items, and the scale goes down to “C.” Determine which category a product falls in by how important it is to your business and how much it affects overall sales and profitability. This gives you areas to give the most attention to when inventory auditing.
Control group: This method focuses on repetition and requires you to count a very small group of products a certain number of times over a short period of time. This allows you to focus on fewer errors at a time and give them the attention they deserve before moving to the next group.
Random sample: Like the other methods, random sampling will make the physical count process much smoother. However, it’s less strategic and simply requires you to choose a random group of items to count frequently.
These are just a few of the cycle counts routes you can take, but they all work with small groups to speed up the physical count process down the road. The process itself should have three phases — planning, execution and analysis. There are certain variables that should be included in every business’s inventory audit process:
Schedule: Because auditing disrupts your regular workflow, it’s very important that you have a clear schedule that lays out exactly how long each part of the process is going to take your team. Choose when you conduct the audit based on when it’d be least impactful on your business but when the high-value inventory will still be able to be audited.
Audit: Using one of the methods listed above, conduct the audit itself. Having an unbiased auditor is essential. Know your business well so you know the various audits that will need to be conducted.
Record: Note that auditing isn’t beneficial unless you keep documentation of your findings. This way, you can compare them year by year and see growth and opportunities to fix discrepancies.
Report: When you’ve nailed down your findings, compile them into an audit report that’s easy to understand. If you ever find yourself in an external audit, the reports will be helpful evidence for you to present.
Planning for an Inventory Audit
Because of the disruption it’ll likely cause your business, planning your inventory audit will make a positive difference. Failing to plan well can lead to a more expensive and longer process than you originally intended.
Timing: As mentioned, it’s incredibly important to strategically choose when you’ll perform your audit to minimize the disruption it causes to your workflow.
Organization: Keeping an organized warehouse at all times will make the auditing process significantly easier and less time-consuming.
Personnel: Communication is incredibly important so your team doesn’t feel blindsided by an audit. The workers you assign to the audit should be detail-oriented, patient and incredibly attentive.
Technology: Use technology to your advantage when performing an audit. There are several inventory management systems you can use to simplify the process and automate areas that are subject to human error when possible. One technological advancement in stock auditing is the use of barcode scanning. It saves your business time and money, eliminates paper and simplifies the training process. Thanks to barcode scanning, you will be more efficient and experience fewer errors.
Learn More About Finale Inventory Today
At Finale Inventory, we provide extensive stock auditing capabilities so you’ll have complete visibility into your inventory. Through our comprehensive software, you’ll be able to quickly audit and address any discrepancies in stock logs. Learn more about our stock auditing capabilities to see how our services can help your business thrive.
Contact us today with any questions or to discover more about our inventory management system.
“The core of maturity, that I see, is starting with a unified view of inventory. I’ve got to be able to accurately represent what do I have, make sure that I know where it’s located so I can get it to my customers quickly.”
— Troy Graham, Descartes
What is the first thing I should fix if I want to scale operations?
Start with a unified view of inventory. The core of maturity starts with being able to accurately represent what you do have and make sure that you know where it’s located to get it to customers quickly. Without a unified view across your warehouses, 3PLs, and vendors, you cannot make the best decisions because you don’t have the best information at hand.
With Inventory Visibility, Businesses Can Make Smarter Allocation Decisions
Once inventory is centralized, businesses can move from reactive updates to intentional allocation. They can decide how much inventory to expose to each channel, when to use buffers, which marketplaces need extra protection, and how seasonality or campaign performance influence availability.
Once I know what inventory I have, how should I decide where to make it available?
Inventory allocation should reflect where orders are coming from, where marketing is working, and which channels carry the most risk. Once you know what you have and where it is located, you can think more strategically using centralized inventory to make prioritization happen automatically. One fertilizer company lost a little over 5,000 orders in one weekend because someone manually uploaded the wrong available inventory to Amazon.
Better Inventory Data Improves Planning, Purchasing, and Growth Bets
Better visibility turns inventory data into a planning tool. With insight into sales velocity, inventory levels, vendors, and channel performance, businesses can make more informed replenishment decisions, avoid overbuying, and test new product lines or vendor-supplied inventory without taking on unnecessary risk.
“You have to have unified inventory to know how to price your products just at that basic level. I can’t price my products if I don’t know the true cost to get it.”
— Mike Bernico, Flxpoint
How does better inventory data help me make smarter buying decisions?
It lets you measure whether your plan is working before you commit more capital. A key question becomes: “Did my plan work? Am I overleveraged in one place or another?” Centralized systems can also help businesses test new product lines or vendor relationships by looking at sales velocity by channel, allowing them to take risks in a calculated and measured way.
Intelligent Order Routing Turns Inventory Complexity Into Automation
Once inventory and supplier data are reliable, businesses can automate fulfillment decisions. Orders can be routed based on cost, speed, margin, location, warehouse priority, vendor fallback, split-shipment rules, or customer expectations. This helps hybrid fulfillment scale because every order does not need a manual review.
How do I decide the best way to fulfill each order?
There is no single answer, which is why order routing needs to account for the context of each order. Intelligent order routing is not just sending an order to someone who has stock; it is taking each and every order and treating it like its own unique use case. Depending on the order, the business may prioritize speed, margin, an internal warehouse, vendor fallback, or preventing split shipments.
Supplier Inventory Sync Extends Inventory Beyond the Four Walls
For hybrid fulfillment to work, supplier inventory needs to become part of the operating model. Supplier sync does not always require advanced technology; it can happen through automated files, FTP, email, APIs, EDI, or ecommerce storefront integrations. The key is replacing manual updates with automated, reliable supplier data.
Can supplier inventory really be treated like part of my own inventory?
Yes, but the goal is not necessarily to force every supplier into a complex integration. Real-time supplier sync can be defined as any way to get an automated update from a supplier, such as Google Sheets, email, FTP, API, EDI, or ecommerce storefront connections. The key is that accurate supplier stock is foundational. If you don’t have an accurate view of what is in stock with your suppliers, you cannot tell your sales channel accurately what’s available.
Exception-Based Workflows Keep Humans Focused Where They Matter
Automation does not remove people from the process. Mature operations let technology handle the routine majority while humans focus on exceptions, such as high-value orders, fraud risk, compliance requirements, restricted products, export rules, or unusual fulfillment scenarios.
If my business has special cases, can automation still work?
Yes. The point is not to automate every possible decision; it is to automate the routine work and surface the exceptions. Businesses should not have to look at every single order. Instead, technology can highlight high-value orders, risky locations, or compliance requirements. The goal is to take care of the 80% of workflows that are obvious while still allowing human review when specific exceptions arise.
The Right Inventory Technology Should Fit the Business, Not Overwhelm It
Software decisions should be based on business fit, not popularity, feature volume, or broad “all-in-one” promises. Growing ecommerce businesses should identify their highest-impact bottleneck, prioritize what matters now, and choose technology that is right-sized but flexible enough to support future phases of growth.
How should I choose software without overbuying or picking the wrong system?
Start with your priorities, not the biggest feature list. Avoid an all-in-one system that claims to “do everything under the sun” and look for a “best of breed approach” with systems that can scale as you add channels or vendors. The practical advice is to stack rank what matters now, make sure the system can support future phases, and choose technology that fits your business rather than overwhelming it.
How to Scale Ecommerce Operations Beyond Spreadsheets
For many growing ecommerce businesses, Finale and Flxpoint work together as a practical answer to these challenges. Finale helps centralize and manage internal inventory, purchasing, warehouse operations, and stock visibility, while Flxpoint helps connect vendor inventory, automate supplier sync, and route orders across hybrid fulfillment networks. Together, they give businesses a best-of-breed way to improve inventory accuracy, reduce spreadsheet work, and scale fulfillment without forcing every process into a one-size-fits-all system.
Ecommerce Fulfillment Operations FAQ
What Is Ecommerce Fulfillment Operations?
Ecommerce fulfillment operations are the processes that move an online order from purchase to delivery. This includes managing inventory, syncing product availability across channels, routing orders to the right warehouse, 3PL, supplier, or vendor, and making sure the customer receives the right product on time. As discussed in the webinar, fulfillment is no longer limited to “what’s in my warehouse these days”; growing businesses may rely on internal warehouses, 3PLs, marketplace fulfillment services, and supplier inventory at the same time.
What Are Ecommerce Fulfillment Operation Examples?
Examples of ecommerce fulfillment operations include updating inventory across Shopify, Amazon, Walmart, and other sales channels; allocating inventory to specific marketplaces; sending orders to an internal warehouse, 3PL, or vendor; syncing supplier inventory through files, APIs, EDI, email, or FTP; replenishing warehouse stock based on sales velocity; and flagging exceptions such as high-value orders, compliance requirements, or restricted products. In the webinar, the speakers also discussed hybrid fulfillment examples where a business may fulfill some products from its own warehouse and use vendors as a fallback or extension of available inventory.
How Can I Track My Inventory at an Ecommerce Fulfillment Center?
The best way to track inventory at an ecommerce fulfillment center is to create a unified inventory view that shows what is available, where it is located, and how that inventory connects to each sales channel. That means tracking inventory across internal warehouses, fulfillment centers, 3PLs, marketplace fulfillment programs, and supplier locations instead of relying on disconnected spreadsheets. The webinar emphasized that businesses need to “accurately represent” what they have and know where it is located so they can get products to customers quickly.
How Can I Connect My Inventory to My Supplier?
You can connect supplier inventory through several methods, depending on what the supplier supports. The webinar discussed low-tech and advanced options, including automated Excel or CSV files, Google Sheets, email updates, FTP servers, APIs, EDI, and direct connections to ecommerce storefronts such as Shopify, BigCommerce, or Magento. The key is to ask suppliers how they share inventory today, then use a system that can automate that data flow instead of manually copying supplier inventory into spreadsheets.
What Is Ecommerce Order Routing?
Ecommerce order routing is the process of deciding where an order is fulfilled from after a customer buys. In a simple operation, every order may go to one warehouse. In a more complex or hybrid fulfillment model, the best fulfillment source may depend on inventory availability, shipping speed, cost, margin, customer location, warehouse priority, vendor fallback rules, or whether the order should be split. The webinar described intelligent order routing as treating each order like its own use case, so businesses can automate the best fulfillment decision without manually reviewing every order.
