What the Tracking System Records
Plants, packages, transfers, conversions, sales, samples, waste and destruction, each tagged with identifiers and timestamps. The accounting system records value; the tracking system records quantity and custody.
The Reconciliation Equation
Opening quantity, plus production and receipts, less sales, transfers, samples, waste and adjustments, equals closing quantity. Run it at the package and category level in both systems and compare.
- Reconcile daily for sales, monthly in full
- Investigate every difference above a written tolerance
- Assign a cause code to each variance
- Retain the reconciliation as a permanent record
Common Causes of Variance
Timing differences from delayed entry, packaging conversions recorded incorrectly, scale tolerance on small weights, unrecorded samples, and returns processed in only one system.
Why It Matters Beyond Compliance
Unreconciled inventory undermines cost of goods sold, distorts margin analysis and weakens the tax position. Regulatory inspections and tax examinations both begin with inventory records.
Frequently Asked Questions
- Should the tracking system or the ledger be treated as authoritative?
- Neither by default. Investigate to determine which reflects physical reality, correct both, and document the resolution.
- How much variance is normal?
- Set a documented tolerance appropriate to your product forms and equipment. What matters is that variances are investigated and explained.
- Can reconciliation be automated?
- Data extraction and comparison can be largely automated, but investigation and cause coding require human judgment.