Accountability for stock records held by a provider

Record accuracy is a contracted obligation with a definition

Accuracy has to be expressed as something measurable: matched locations, matched units, or value variance, assessed over a stated population and period. Each definition flatters a different operation, so agree which applies and how it is calculated before the first review. An undefined promise to keep records accurate is unenforceable and, more importantly, unmanageable, because nobody can see whether the position is improving.

Counting programmes and the tolerance argument

Perpetual counting spread across the year, wall-to-wall counts, and targeted counts on high-value or fast-moving lines serve different purposes and cost different amounts. Decide who performs counts, who attends, who authorises adjustments, and what happens when a variance exceeds tolerance. Providers generally want the right to adjust small differences without approval; clients generally want visibility of every adjustment. The workable answer usually distinguishes between routine correction and material variance.

Shrinkage, write-off and the liability limit

Agreements typically allow for a level of unexplained loss in normal working, with the provider carrying exposure beyond it, subject to a cap. Whether that cap is meaningful depends on the value density of the goods, and it is rarely aligned with what the stock is worth. Treat it as a commercial term, and take the insurance position to your own broker rather than assuming the provider's cover extends to your goods.

Two systems that have to agree

Reconciliation depends on both parties recording the same events in the same units at roughly the same time. Timing differences at period end, goods received but not booked, adjustments posted in one system only, and unit-of-measure mismatches account for most apparent discrepancies. Agreeing a reconciliation routine, with a named owner and a cadence, converts an annual argument into a running control. Where stock is held under a customs procedure, the record keeping obligations are set by the customs authority and are stricter than commercial practice.

Frequently asked questions

Should the client attend stock counts at a provider site?

For a full count, attendance or independent observation is normal and often expected by auditors. For routine perpetual counting, most clients rely on the provider's process plus a right to observe. The right to attend at short notice is worth holding even when it is seldom used.

What does an accuracy measure fail to capture?

Offsetting errors. Two locations wrong in opposite directions can leave the total correct while both picks fail. That is why location-level measures give a truer picture of operational health than a value-based reconciliation, even though finance cares about the latter.

Who owns an adjustment posted by the provider?

The stock is the client's, so the financial effect lands with the client unless the agreement attributes the loss to the provider. The practical control is approval: material adjustments should need client authorisation, with supporting evidence, before they are posted.