Count differences: thresholds, clearing and approval

The count is finished, the comparison with the book stock is done, and the difference list has 180 lines. Where do you start? Anyone who recounts every line ties the team up for days. Anyone who simply writes off every line enters counting errors, timing gaps and genuine losses into the books without distinction. A written tiered model solves the problem: before the count it defines how each difference is handled, who clears it and who approves its posting.

Look at quantity and value together

Three pieces of a screw are not the same as three pieces of a control unit. So always consider two measures: the deviation as a percentage of the target quantity and the value of the deviation in your reporting currency. For goods that are measured, such as bulk material, cable or roll goods, a measuring tolerance is added, which you set in advance. Differences within the tolerance are documented but not recounted.

A tiered model with three tiers

• Tier 1: The difference lies within the measuring tolerance or its value is below 50 EUR. It is noted in the difference list and proposed for posting without a recount.
• Tier 2: The value lies between 50 and 500 EUR, or the deviation is more than 10 per cent of the target quantity. A third team recounts, after which an accounting employee checks the documents of the past weeks.
• Tier 3: The value exceeds 500 EUR, or it is a sensitive item where every difference counts. A recount, a document check and a short description of the cause are required, and management is informed.

The thresholds given are freely chosen sample values. Set your own values with controlling and head office, ideally before the count starts and never on the basis of the result.

A worked example (fictional)

Of the 180 differences, 120 fall into tier 1, 48 into tier 2 and 12 into tier 3 (120 + 48 + 12 = 180). Only tiers 2 and 3 are recounted, which is 60 positions. Assume a recount takes ten minutes: 60 × 10 = 600 minutes, or ten hours. Recounting all 180 lines would take 180 × 10 = 1,800 minutes, or 30 hours. In this example the tiered model saves 20 hours and directs attention to the twelve lines that carry real weight.

Status instead of silence

Every line of the difference list needs two entries: a cause and a status. A group is enough as a cause at first, for example counting error, timing gap, wrong posting, mix-up or suspected shrinkage. Three values suit the status: "open", "cause established" and "cannot be clarified". "Cannot be clarified" is also an admissible answer; it only has to be justified and confirmed by a responsible person. Columns for item, bin location, target, actual, difference, value, tier and the name of the person handling it are also useful.

Approving the correcting entry

Posting the difference is a decision of its own and does not belong in the hands of the person who manages the stock. A four-eyes principle is usual: the warehouse manager proposes, accounting or controlling approves, and for tier 3 management as well. Posting takes place only after approval, with a reference to the line in the difference list. How stock differences are to be treated in the accounts and for tax purposes is something to settle with your auditor and tax adviser. The difference list provides the basis; accounting does the valuation.

In short

A tiered model makes the difference list manageable: little effort for the trivial, full attention for the essential, complete documentation for everything in between. AuditMaster keeps every difference with a cause or an open clearing status and delivers the difference list in a form that accounting and auditors can process directly.