What inventory shrinkage means in QuickBooks Online

A count difference is not yet shrinkage

A physical inventory count that finds fewer units than the books show gives you a shortage. A shortage is only a variance until you check it. The arithmetic is book quantity minus counted quantity, one item at a time. The full process is in how to do a physical inventory count.

Check five things before you call a shortage shrinkage. Add the counted quantity across every location of the item. Look for a receipt or shipment entered late or with the wrong date. Confirm the unit of measure matches the books. Make sure a look-alike item was not counted in its place. Recount the item with a different counter, who does not see the first count. Whatever is left after those checks is shrinkage.

A QuickBooks Online Plus or Advanced company holds one quantity on hand per item, so a count that spans several aisles and racks has to be added up per item before you compare it with that number. If the books and the count still disagree, see why QuickBooks inventory does not match.

See also inventory variance and how to reconcile variances after a physical count.

Shrinkage goes one way; adjustments go both

A count also finds overages, and the adjustment that follows can raise a quantity as easily as lower it. Shrinkage names only the loss side. Ask your accountant which date the adjustment carries and which account to use; on the form, that is the inventory adjustment account you select.

Once you have confirmed a loss, recording inventory shrinkage in QuickBooks Online walks through the entry. Inventory adjustment in QuickBooks explains the form itself.

Where Count fits

InventoryWare Count lists items that QuickBooks shows in stock but nobody counted as possible missing items. An item that nobody counted is never adjusted automatically. Count surfaces it and leaves the decision to a manager.

InventoryWare Count is built for one complete physical inventory count, and posting adjustments to QuickBooks from a partial count is not available.