Physical count and kardex

Physical count and kardex

If someone asked you right now how many units of each product you have in stock, would you answer with confidence? Most owners of small businesses rely on what "should be there" according to their records and only discover the truth when an urgent order cannot be filled or when stock runs out during the peak season. The only way to know for sure what is actually in the warehouse is to run a physical count: checking product by product, unit by unit, and comparing the result against the kardex, the record that tracks the entries and exits of every item.

In this article we explain why the physical count is essential for a small business, how to prepare it so it does not turn into chaos, how to reconcile it against the kardex, and what to do with any differences you find. At the end you will find a practical example with its reconciliation table, ready to apply as early as next week.

Why run a physical count?

The kardex is a theoretical record: it logs what enters and what leaves, but it cannot see what happens inside the warehouse. Between those two worlds, silent losses creep in that add up to more than they seem:

• Shrinkage and expiry: products that get damaged, expire, or spill and are never recorded.
• Internal or external theft: units that leave without an invoice or without authorization.
• Recording errors: entries typed incorrectly, exits that were never logged, forgotten returns.
• Misplaced merchandise: products that exist but sit in another aisle or inside another box.
• Mixed lots or references: two similar products that get confused and are shipped incorrectly.

Every one of these situations leaves a trace: the difference between what the kardex says and what is actually on the shelf. If that difference is never measured, it becomes part of the business's invisible cost. Even worse, if you decide how much to buy based on an outdated kardex, you will overbuy or underbuy, and both choices cost money: tied-up capital in the first case, lost sales in the second.

The kardex: the reference against which the count is reconciled

For a physical count to make sense, you need a reliable point of comparison, and that point is the kardex. In its simplest form, the kardex is a per-product record that logs all entries (purchases, customer returns, positive adjustments) and all exits (sales, shrinkage, negative adjustments). Subtract the exits from the entries, add the opening balance, and you get the theoretical stock of each item at any moment.

When the business keeps the kardex up to date, with every movement recorded on the day it happens, the physical count becomes a simple test: what you counted should match what you recorded. When it does not match, the kardex is the baseline that lets you measure the size of the problem, because the difference between the count and the kardex is exactly what is missing or what is left over.

How to prepare the physical count

An improvised count produces unreliable numbers. Preparation is half the battle, and in a small business it can be done in a couple of days:

1. Stop or reduce operations: schedule the count during a low-traffic time or, if the volume justifies it, close the business for half a day.
2. Tidy the warehouse before counting: gather every item in one place, join boxes of the same product, and label anything that is loose. Counting over clutter means counting twice.
3. Prepare the forms: make a list of all products with their codes, leaving blank space to write down the counted quantity. Never write the kardex balance on the same sheet as the count: that invites "matching" with your eyes.
4. Set up counting teams: one person counts aloud while another writes. For small or expensive items, two people counting separately and comparing afterwards is even better.
5. Count by zones: divide the warehouse into sections (aisle A, aisle B, aisle C) and move in a single order so nothing is skipped or repeated.
6. Mark what you have counted: use a mark, tape, or label on each unit or pallet you have reviewed.

One golden rule: do not stop halfway through the count to serve a sale, because interruptions are the main source of counting errors. If the business cannot close, count item by item and immediately deduct anything sold from an item that has already been counted.

How to reconcile the count against the kardex

Once the count is finished, it is time for the reconciliation. For each product, two numbers are compared:

• The stock recorded by the kardex, that is, the theoretical balance.
• The actual quantity counted in the warehouse.

The subtraction between the two gives the difference: if the count is lower than the kardex, there is a shortage; if it is higher, there is a surplus. Before adjusting anything, verify every large difference: check whether there were unrecorded entries or exits, whether a product was counted in another zone, or whether there was a typing error in the count. Only after that review should the adjustment be made.

With Kardex Tauro this process is straightforward: the system includes a Physical Counts window where the count is entered per product and the program automatically compares it against the kardex balance, showing the differences at a glance. When the count yields fewer units than recorded, the negative difference is recorded as shrinkage or a decrease in stock, so the kardex ends up reconciled with reality. Reconciliation stops being a paperwork headache and becomes a task that takes minutes.

Practical example: the reconciliation table

Imagine a grocery store that decides to count its warehouse. The kardex says how much of each item should be there; the team counts and writes down what it finds. The reconciliation looks like this:

Four units of rice are missing: a sack may have spilled or an order may have gone out without being recorded. Three bottles of oil are extra: perhaps a purchase arrived over-invoiced or a return was never logged. The lentils match perfectly. Three units of coffee are missing, possibly the ones consumed in the office and never recorded. Adjusting the kardex with these figures leaves the theoretical stock identical to the real one, and from that moment purchases and sales are calculated on true data.

What to do with the differences you find

Differences are neither punished nor ignored: they are investigated, adjusted, and prevented.

Surpluses (count higher than the kardex): these are usually unrecorded entries, forgotten returns, or dispatch errors. Adjust the kardex upward and review the goods receiving procedure so the situation does not repeat itself.

Shortages (count lower than the kardex): these are shrinkages or decreases in stock and, in the kardex, they are recorded as exits under that concept. In Kardex Tauro, the negative difference of a count is recorded as shrinkage or a decrease, so the balance drops to the real value. If the shortage is large and recurring, review who has access to the warehouse, the dispatch procedure, and the returns policy.

The underlying rule is a single one: the kardex must reflect reality, not the other way around. That is why, once the cause is verified, the adjustment is made without fear and with support: whoever adjusts writes down the date, the quantity, and the reason, because a kardex without traceability gets lost again over time.

How often should you do a physical count?

Frequency depends on the size of the inventory and how fast each product moves, but there is a practical guideline:

• Full inventory: at least once a year, preferably before the peak season or the accounting year-end closing.
• Fast-moving products: every month or every two months, because they concentrate the highest risk of differences.
• Cycle counts: instead of stopping the whole business, count a group of items each week so that over the year the entire inventory has been counted.
• After a special event: an opening inventory, a change of warehouse manager, or a move are ideal moments to count and start from a clean base.

A small business does not need an audit department for this: it needs discipline and a date marked on the calendar. Counting little and well beats counting a lot and badly.

Conclusion

The physical count and the kardex are two sides of the same coin: the kardex says what should be there and the count shows what really is. When both match, the business buys wisely, sells without surprises, and knows its true margin. When they do not match, the difference is an early warning of shrinkage, errors, or risks worth correcting in time.

If you still reconcile your inventory with paper and a calculator, go ahead and organize a first count using the steps in this article. And for day-to-day work, tools such as the kardex and the Physical Counts window in Kardex Tauro are a reminder that keeping inventory up to date is not a luxury for large companies: it is a decision any small business can make as early as this very week.