How to record stock counts and shrinkage in UAE retail without guesswork

Instead of counting everything once a year, count a slice every week. Rank items by value: the top 20% of lines that make up most of your stock value get counted monthly, the rest quarterly. A mobile phone accessories shop might count phone cases monthly and cables quarterly.

Cycle counts catch problems while they are small and recent enough to explain. They also make the year-end count faster, because the book quantities are already close to reality.

When the count differs from the system, post an adjustment at cost. The entry reduces inventory and increases a shrinkage expense (or the reverse for a surplus). Keep shrinkage in its own account under cost of sales so you can see it as a percentage of sales.

Worked example: a Sharjah cosmetics store’s system shows 240 units of a perfume at AED 85 cost. The count finds 228. The 12-unit shortfall is AED 1,020 at cost. Debit shrinkage AED 1,020, credit inventory AED 1,020. If the store sells AED 310,000 in a typical month, a monthly shrinkage of AED 4,600 across all items is about 1.5% of sales.

A shortage is a symptom. Check the obvious causes before accepting it as loss.

• Goods received but not entered, or entered against the wrong item code.
• Sales rung up under a generic item instead of the specific product.
• Supplier short-delivery accepted without checking the delivery note.
• Transfers between branches posted at one end only.
• Returns to suppliers shipped but not recorded.

When you bought the stock, you likely recovered input VAT. Losses from theft or breakage do not usually create output VAT, because nothing was supplied. But stock given away free, used by staff or taken by the owner may be treated differently under the VAT rules on deemed supplies. Keep a clear record of why each item left, and ask your tax agent about giveaways and owner use.

Expired goods destroyed under supervision should have a destruction record. It supports the write-off for both the auditor and the FTA.

Retailers with outlets in several malls should hold stock by location. A shortage at one branch and a surplus at another often means an unrecorded transfer, not theft. Book transfers when goods leave and confirm them when they arrive, so in-transit stock is visible.

Compare shrinkage by branch. If Dubai Marina runs at 0.8% and a Sharjah branch at 2.6%, the gap points at a process or a person, and you know where to look.

Auditors will check that stock is valued at the lower of cost and net realisable value. Slow-moving and damaged lines may need writing down below cost. Prepare an ageing of stock by last sale date before the audit; anything unsold for 12 months deserves a look.

Worked example: 300 units of a summer sandal range cost AED 45 each and now sell for AED 39 after a markdown, with AED 4 of selling costs per pair. Net realisable value is AED 35, so each pair is written down by AED 10, a AED 3,000 charge. Recording it before the audit avoids a late adjustment that changes the profit everyone has already seen.

HelloBooks tracks stock quantities and cost, with multi-warehouse and lot or batch tracking on the Business plan. Enter count results and the AI agent posts the adjustment to shrinkage, asking you to confirm reasons for large variances. Ask “which items had the biggest count differences this quarter, by branch?” and get the list.

HelloBooks does not connect directly to point-of-sale systems; sales summaries come in as journals or imports. For a custom shrinkage report by branch, request it at /book-a-demo.