What is an inventory reconciliation process?

The inventory reconciliation process is vital for maintaining the accuracy and integrity of inventory records. It involves comparing the actual physical counts of inventory in stock with the amounts that are recorded in the inventory management system. This process helps identify discrepancies that may arise due to various factors such as theft, damage, mismanagement, or clerical errors.

By performing this reconciliation regularly, businesses can ensure that their financial statements reflect true inventory values, which is crucial for both operational decision-making and compliance with accounting standards. This accuracy allows companies to make informed decisions regarding restocking, fulfillment, and overall inventory management.

The other options do not accurately describe the inventory reconciliation process. Auditing employee performance focuses on evaluating staff efficiency, while optimizing storage pertains to maximizing space utilization. Reducing costs is generally related to overall business strategies rather than specifically linked to inventory counts and records.