Out-of-stocks and overstocks caused by inventory inaccuracies cost retailers $1.77 trillion globally each year. And that’s before you factor in theft — a major contributor to shrinkage and one of the biggest inventory challenges retailers face.
Typos, miscounts, syncing delays, and internal loss may seem minor on their own, but together they create major headaches. Over time, these small errors add up — slowing reorders, skewing reports, and making it harder for customers to trust what’s in stock.
Learn about the five causes of inventory discrepancy in retail and how to address them before they snowball.
5 Common Causes of Inventory Discrepancy
Inventory discrepancies don’t always indicate theft or fraud. In most cases, they’re minor, repeated mistakes that go unnoticed until you run out of stock or reorder too late.
These five common causes of inventory discrepancy can occur in every kind of store, from phone repair shops to grocery markets, and each one can chip away at your bottom line if left unchecked.
1. Manual Data Entry Mistakes
Manual entry is one of the most common causes of inventory discrepancy. Even careful staff make mistakes about 1% of the time. That's 10 errors for every 1,000 transactions, often during receiving, transfers, or sales. In a convenience store with thousands of stock-keeping units (SKUs), that leaves plenty of room for costly errors.
One wrong digit can throw off your counts, lead to incorrect reorders, or cause stockouts at the worst possible time. This is likely your biggest risk if you still use spreadsheets or handwritten logs.
2. Theft and Shrinkage
Not every loss shows up on a receipt. Theft — shoplifting or employee pilfering — accounts for 66% of retail shrinkage, with internal and external theft nearly evenly split.
These losses often go unnoticed until a physical count exposes the gap. Even small thefts can impact stores with high-value, easy-to-pocket items like phones, disposable vapes, or liquor. Without consistent tracking and internal controls, shrinkage becomes a silent cost that affects profits without setting off alarms.
3. Counting Errors
Inventory counts are essential for keeping accurate records, but they’re easy to get wrong. During physical counts or cycle checks, items can be skipped, misclassified, or double-counted.
Smaller stores like butcher shops or convenience stores often rely on manual counts due to limited staff or tighter budgets, which increases the risk. With narrow windows to count fast-moving items, even small miscounts can disrupt reorders or mask larger issues like shrinkage.
4. Receiving Errors
Receiving mistakes can easily happen, especially when staff have to leave the floor to check in deliveries during a busy shift. One lapse in concentration can lead to sign-offs without verifying counts, accepting the wrong SKUs, or entering case quantities as individual units.
Common errors like mismatched SKUs or unlabeled boxes can throw off inventory records. What looks like a stock issue later on might trace back to a rushed delivery, causing confusion, misplaced blame, and delays in restocking the right products.
5. Software or Syncing Issues
When your point of sale (POS), inventory, and accounting systems aren’t in sync in real time, stock errors show up quickly. Sales might process at the register, but if your inventory tool lags or doesn’t connect, your stock counts stay inaccurate.
This is especially risky if you also sell online. Instant syncing can improve inventory accuracy by 37%, reduce lost sales, and improve customer satisfaction.
Without up-to-date, centralized data, it’s easy to oversell items that are already gone or under-order products that appear to be in stock. Stores using disconnected or outdated tools often rush to fix mistakes during audits or restocks, wasting time and creating avoidable headaches.
How To Prevent Inventory Discrepancies
Once you understand the common causes of inventory discrepancy, the next step is to fix the cracks. The problem in many stores is twofold: too much manual work and insufficient real-time tracking.
Without up-to-date inventory data, it’s hard to know what’s on the shelf — or where the errors are coming from. The right tools and habits can eliminate mistakes before they happen, saving time, money, and stress.
1. Use Barcode Scanning and Mobile Tools
Barcode scanners and mobile inventory apps tighten inventory management. Instead of keying in SKUs or quantities by hand, staff can scan items during receiving, transfers, sales, and stock counts. Updates sync to your POS, keeping records accurate in real time.
This reduces missed entries, typos, and delays. For stores with fast-moving stock or high SKU counts, live syncing helps keep inventory accurate without slowing down checkouts or occupying staff chasing errors or missing goods.
2. Train Staff and Standardize Procedures
Consistency starts with clear steps. Create standard operating procedures (SOPs) for core tasks like receiving, counting items, and logging inventory changes. Keep each one simple — include who does it, when, and how.
Walk through processes during onboarding and host refreshers anytime tools or systems change. Hands-on training helps staff build muscle memory and reduces repeat mistakes during busy shifts.
3. Implement Regular Audits and Cycle Counts
If you wait until the year-end stocktake, minor mistakes can build up and become harder to fix. Instead, use cycle counts, which involve checking small sections of inventory regularly.
Here’s how to approach it:
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Start with your most sensitive stock — high-value or fast-moving items vulnerable to theft or miscounts, like phone accessories, meat cuts, or snack items.
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Divide your inventory into categories and rotate through them weekly or monthly.
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Track and compare results to spot patterns, recurring mistakes, or possible inventory shrinkage.
This method keeps your records more accurate year-round and helps fix problems before they affect reorders or sales.
4. Monitor for Theft and Shrinkage
Theft hurts margins, but the effects echo further, skewing your inventory data and making it harder to trust sales reports.
Shrinkage can’t always be prevented, but it can be tracked:
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Install visible cameras near stockrooms, registers, and blind spots to deter casual theft.
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Use your POS to limit employee access to high-risk items or adjust permissions based on roles.
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Investigate recurring discrepancies in specific categories or shifts — don’t write it off.
Consistent, low-level shrinkage is often a sign of internal theft or process breakdowns that need immediate attention.
5. Choose Integrated, Reliable Software
If your POS system doesn’t sync with accounting, e-commerce, or supplier tools, you’ll constantly be cleaning up errors and piecing together reports after the fact.
Look for software that supports barcode scanning, real-time stock updates, low-inventory alerts, and role-based access. Avoid setups where data needs to be transferred manually — even a small delay can cause count discrepancies.
Regularly spot-check syncing across systems to catch gaps before they impact ordering or reporting.
Preventing Errors Is Cheaper Than Fixing Them Later
The causes of inventory discrepancy aren’t always dramatic — they’re usually small oversights that build up until your reports, reorders, and customer experience start to suffer. But with the right system and routines, they’re easy to catch early.
POS Nation offers inventory systems tailored to different types of retail businesses — from liquor stores to cigar lounges — so you get tools that fit the way your store runs.
Features like barcode scanning, user permissions, real-time inventory updates, and integrated sales reporting help reduce stock errors at every stage.
Book a demo with POS Nation to find a POS system that works for your business — and keeps your inventory accurate, dependable, and under control.