When your inventory count doesn't match what your system says you have, it's rarely one single problem. It's usually one (or several) of a handful of common causes. The good news is that the gap doesn't have to stay wide. (For more on closing it, see our guide on how to decrease your inventory gap.)
Causes of stock discrepancies
Here are the most common reasons your inventory count and your books stop matching up.
Track Refunds
Accurately tracking refunds matters more in ecommerce than almost anywhere else. Return rates for ecommerce businesses range from 20% to 50% depending on price point and category, more than double the rates seen in physical stores. Research also shows that 41% of shoppers buy multiple variations of a product with the intent of returning some of them, and 42% of ecommerce shoppers have returned an online purchase in the last six months.
The solution isn't to restrict returns, though. 96% of customers say they'd shop again with a company that has an easy return policy, and companies like Amazon and Zappos have built real growth on exactly that. Instead, build a return policy that works for your business, enforce it consistently, and use software to track how many returns you get, why, and what they cost you. Amazon FBA reports and QuickBooks reports are two starting points if Amazon is one of your channels.
Giveaway products
Giving away stock, through promotions, events, shows, or charity donations, can generate real PR value and attract new customers. But it will throw off your inventory count if those giveaways aren't tracked the same way a sale would be. A good inventory management tool is one of the more reliable ways to keep giveaways from slipping through the cracks.
Defective stock
Defective or unsellable stock can also distort your numbers if it's still sitting in your active inventory count instead of being written off. Defects come from several sources: perishable items expiring, damage during shipping, poor storage conditions, or returns that come back in unsellable condition. How you account for defective stock directly affects your books. There are two standard approaches: expense it directly to Cost of Goods Sold, or offset your inventory account with an allowance account.
Theft and inventory shrinkage
Shoplifting and employee theft, together known as inventory shrinkage, cost U.S. retailers an estimated $112 billion in 2024, according to the National Retail Federation, the highest shrink rate in more than a decade at 1.68% of revenue. In categories like fashion and accessories, shrinkage can account for up to 2.43% of sales. On $300,000 in annual sales, that's $7,290, real money quietly disappearing before it ever shows up in your COGS.
The four main types of shrinkage are shoplifting, return fraud, employee theft, and administrative error. Shoplifting is the single biggest contributor at 36.5% of annual losses, with employee theft close behind at 30%, and ecommerce businesses aren't immune just because they don't have a storefront. Employee theft can happen at any point in the inventory cycle: while stock sits in storage, while it's being moved internally, or even during shipment to the customer.
The fix is refining your internal controls over time. If theft is a real concern, that can mean better hiring and screening practices, honest conversations with staff, or investing in more security, and making sure whatever solution you choose is actually built into your systems and processes, not a one-time fix.
Reconcile received and ordered products
Cross-checking your orders, purchases, and received inventory is essential. Did you receive everything you ordered? Was anything missing? Did you receive items you didn't order? Verifying this is one of the most direct ways to catch the source of a discrepancy.
What can you do?
Some of these issues come down to better internal controls: a strong workplace culture, good training, and solid hiring practices all help. POS systems like Shopify can also support better monitoring and inventory management. If you don't have the internal bandwidth, outsourcing your inventory management to professionals is another solid option, one that can meaningfully shrink your inventory gap and save you a lot of time.
Frequently asked questions
Why don't my inventory counts match my books?
The gap usually comes down to a handful of common causes: untracked refunds, giveaways, defective stock that hasn't been written off, theft or shrinkage, or a breakdown in reconciling what was ordered against what was actually received.
Why are ecommerce return rates so much higher than physical retail?
Ecommerce return rates typically run 20-50%, more than double physical store rates, partly because a notable share of shoppers intentionally buy multiple variations of a product planning to return some of them.
How should I account for defective or unsellable stock?
You have two options: expense it directly to Cost of Goods Sold, or offset your inventory account with an allowance account. Either way, it needs to come out of your active inventory count.
How much does theft and shrinkage actually cost businesses?
Inventory shrinkage cost U.S. retailers an estimated $112 billion in 2024, the highest shrink rate in more than a decade at 1.68% of revenue, and it can account for up to 2.43% of sales in categories like fashion and accessories. Shoplifting and employee theft are the two largest contributors.
What can I actually do to reduce stock discrepancies?
Strengthen internal controls, build a strong workplace culture with good hiring and training practices, use POS and inventory management tools to monitor stock, or outsource inventory management to professionals if you don't have the bandwidth in-house.
Stop guessing where your inventory went
Chasing down stock discrepancies one cause at a time is exhausting, and it's rarely just one thing. LedgerGurus helps ecommerce businesses build the internal controls and inventory processes that close this gap for good, so your books actually reflect what's on your shelves.
