A stocktake isn't finished when the counting stops. It's finished when three numbers agree: what's physically on the shelves, what your stock system says is there (Cin7, Unleashed, MYOB inventory, a warehouse management system or a spreadsheet), and the inventory value on the balance sheet in Xero or MYOB. The order matters. Settle the cut-off first, count, post the adjustments in the stock system (not the ledger), then compare the stock system's valuation to the inventory account, explain every difference, post one documented correction, and file the paperwork. This guide walks through each step for wholesalers and manufacturers.
The problem in plain English
Most businesses treat the stocktake as a warehouse job. The team counts, someone keys the numbers in, and the stock system is "right" again. Then the accountant finds the inventory figure on the balance sheet is different from the stock report, and nobody can say whether the count, the system or the accounts are wrong.
That happens because a stocktake touches three records kept by different people: the shelf, the stock system (quantities and costs by item and location) and the ledger (one number, the inventory asset account). Fix only the first two and the ledger quietly stays wrong. "Fix" the ledger with a journal and the detail stops explaining it.
For the everyday causes of drift and a monthly check, see why Cin7 or Unleashed stock values don't match Xero or MYOB. This post is the stocktake itself.
Step 1: Set the cut-off before anyone counts
Most stocktake differences are cut-off mistakes, not counting mistakes. Pick the exact moment the count represents (for example, close of business on 30 June) and decide how each kind of in-between transaction is treated.
- Goods received but not yet invoiced. If it's on the shelf, count it and enter the receipt before the cut-off. Our guide to goods received not invoiced (GRNI) explains how that liability should sit in the accounts.
- Goods in transit. Stock you own (depending on the shipping terms) that hasn't arrived. List it separately with its cost; don't receive it early.
- Dispatched but not yet invoiced. Don't count it, and make sure the shipment is entered so the stock system has taken it off.
- Invoiced but not yet dispatched. Set it aside and decide, in writing, whether it's counted.
- Returns, consignment and customer-owned stock. Separate them physically and decide in advance whether each counts.
- Work in progress. Manufacturers need a rule for part-finished jobs and open production orders.
Then freeze movement: stop receiving and dispatching during the count, or use a marked holding area. Unleashed's own stocktake guidance warns that receipts or shipments processed after the count but before the adjustments are finalised cause discrepancies, and suggests parking online-store orders until the count is complete.
Step 2: Count properly
- Use count sheets or scanners generated from the stock system, by location and bin, and count blind where you can.
- Recount high-value items and anything with a large variance.
- Watch units of measure. A carton of 12 keyed as 12 cartons is a classic error.
- Tag each area or pallet once it's counted so nothing is counted twice.
Step 3: Post the adjustments in the stock system
Enter the count in the stock system, not in Xero or MYOB.
- Cin7 Core: a stocktake has an effective date, a location and an account for the difference. Cin7's help centre says the effective date is used as the date of the journals the stocktake creates, and that the value difference can be sent to an account such as an inventory discrepancy account. Set the effective date to your cut-off, not the day you finished keying.
- Unleashed: create the stock count first so it's "In Progress", enter or import the counts, run the variance report, recount where needed, then click Complete. Unleashed warns that completing locks the count, and that leaving an item's count as 0 sets its stock on hand to zero. Delete items you didn't count rather than leaving them at 0. Stock adjustments then post to Xero as journals.
- MYOB inventory (AccountRight / MYOB Business): MYOB's Count Inventory window lets you key counted quantities and shows the difference, then creates inventory adjustments. MYOB's help says each adjustment should go to an expense account such as shrinkage, not to the inventory asset account.
- A WMS or a spreadsheet: the count goes there first, and the value change goes to the accounts as a journal. Have a second person check the totals.
Review the variance report line by line before completing. A large negative variance is often an unentered receipt or stock in the wrong location, not theft.
Step 4: Compare the stock valuation to the balance sheet
After the adjustments have synced, run two reports at the same cut-off date:
- The stock valuation report from the stock system (Cin7's stock valuation, Unleashed's Stock on Hand Enquiry total, MYOB's inventory value report, or your WMS valuation).
- The balance of the inventory account in Xero or MYOB, plus any stock in transit or GRNI accounts you use.
First clear the integration's sync queue (Unleashed's help says to confirm the Xero export queue shows no pending or failed exports). Write the difference down, even if it's small.
Step 5: Find out why they differ
A difference here isn't a counting problem; the count is already in the stock system. It's a gap between the stock system and the ledger. The usual causes:
- Manual journals to the inventory account. A past stocktake adjustment, a year-end entry or a write-off posted straight into Xero or MYOB, which the stock system never saw. List every entry in the inventory account that didn't come from the integration.
- Costing method. The stock system values stock at average cost, FIFO or standard cost, and the ledger only knows what the integration posted. A cost revaluation in the stock system that didn't sync, or a standard cost update in a manufacturing system, shows up here.
- Landed costs. Freight, duty and customs charges added to stock in the stock system but expensed in the ledger, or the reverse. If the freight bill arrived after the goods were sold, the costs will have been split. Our post on landed cost calculation covers how to treat this consistently.
- Items not tracked. Packaging, consumables or non-stock items that are counted on the floor but were never set up as tracked items, or the other way round.
- Timing. Sales invoiced in one period and shipped in the next, or adjustments dated on the day they were keyed rather than the cut-off date.
- Edited transactions. Unleashed notes that changes made in Xero don't flow back to Unleashed.
Put a dollar amount against each cause. If what's left unexplained isn't small, keep looking before you post anything.
Step 6: Post one documented correction
When the stock system's detail is right and every difference is explained, bring the ledger into line with the stock system, never the other way round.
- Fix at the source where you can, such as a missing landed cost or a failed sync, so the integration posts the right entry.
- Post a single journal for what's left, dated at the cut-off, to a stock variance or stock adjustment account rather than burying it in cost of goods sold. Your accountant will tell you how they want that account treated at year-end.
- Write the explanation in the journal narration and attach the reconciliation.
Then set a lock date in Xero or MYOB for the period.
Step 7: Document it for next time
Keep a short stocktake pack: the cut-off rules, count sheets, variance report, both valuation reports, the reconciliation and the journal. It makes next year faster, and it's your evidence if the tax return relies on the count.
On tax: the ATO says businesses should do a stocktake as close as possible to the end of each income year, and value each item at cost, market selling value or replacement value. Cost includes freight, insurance, duty and delivery to get the stock to where it is. The ATO's simplified trading stock rules, for small businesses whose stock value changed by $5,000 or less in the year, rarely apply to a wholesaler or manufacturer. Confirm with your accountant which method you use and whether it differs from your stock system's costing.
When it's simple, and when it's worth getting help
With one warehouse, Cin7 or Unleashed on Xero, no journals to the inventory account and numbers that agreed last year, this procedure and your bookkeeper are enough. Your Cin7 or Unleashed partner can fix account mapping.
It's worth getting help when the stock value hasn't agreed for more than one period, when stock is spread across a WMS, a manufacturing system and Xero or MYOB, when there's more than one entity, or when every stocktake ends with a large unexplained journal. Those problems sit between the systems, which is the work we do. See our inventory management consultant service, our guide to inventory systems for wholesale and manufacturing, and our page on why your systems give different numbers. If you'd like the whole process and system set-up mapped and written up, that's what the Process & Systems Audit does.
Frequently asked questions
Should stocktake adjustments go in Xero or in Cin7/Unleashed?
In the stock system, and let the integration post the value change. An adjustment posted directly in Xero leaves the stock system's quantities wrong and creates a difference that comes back next month.
Why doesn't my stock value match the balance sheet after a stocktake?
Usually because of an earlier manual journal to the inventory account, landed costs treated differently in each system, a sync that failed, or adjustments dated after the cut-off. Compare the two reports at the same date and list the non-integration entries in the inventory account.
What account should stocktake variances go to?
An expense account such as stock variance, shrinkage or inventory discrepancy, not the inventory asset account itself. MYOB's help gives the same advice. Ask your accountant how they want it shown in the accounts.
Do I have to do a stocktake at 30 June?
The ATO says to do one as close as possible to the end of the income year, unless the simplified trading stock rules apply to you. Many businesses also count during the year, on a cycle, so the year-end count has fewer surprises.
If your stocktake never quite ties back to Xero or MYOB, book a free initial chat. We'll tell you plainly whether it's a set-up fix or something that needs work across your systems.