We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Merchandise Inventory?

H. Bliss
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Merchandise inventory is an accounting term referring to the sellable goods a company has on hand and can sell to consumers. Sometimes referred to as just inventory, it is considered to be a type of asset. For retail companies that sell merchandise, merchandise inventory appears on the business's balance sheet. It is an assessment of the total value of the physical merchandise a company has on hand and available for sale.

A balance sheet is essentially a summary of the financial picture of a company at a certain date and time. Along with assets, including merchandise inventory, a balance includes the company's liabilities and the total worth, also known as net worth, of the company. Investors use information from a balance sheet like merchandise inventory to make an assessment of the value and financial stability of a company.

Keeping track of merchandise inventory is an important part of loss prevention. Reducing loss of inventory can include increasing company security, sales floor supervision, and regular inventory of company merchandise by an independent inventory company. Increasing company security to reduce loss of inventory involves supervision of inventory from when it is received to when it leaves the store in a sale. By leaving no movement of the merchandise unaccounted for, a company can reduce losses and may be able to identify and eliminate the source of losses when they occur.

Checking merchandise quantities upon arrival is a vital step in ensuring no inventory was lost or forgotten in shipment. Once inventory is in a store, the business can use methods like surveillance, employee bag checks, and attentive customer service to reduce loss of inventory through theft. Since most inventory theft comes from employees, employee bag checks and sales floor supervision can be an embarrassing, but necessary, routine.

Tools used to keep track of merchandise inventory include sales records, inventory software, and inventory devices. To ensure an accurate assessment of merchandise inventory that is independent from the people charged with managing the inventory, a company might hire an outside company that provides professional inventory services. When an outside inventory service assesses inventory for a company, it usually means they travel to the location where the inventory is stored and count the inventory in person. This is sometimes done by hand with a paper ledger to record amounts, but is most frequently done with a computer system and devices that scan merchandise tags to record inventory.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
H. Bliss
By H. Bliss
Heather Bliss, a passionate writer with a background in communication, brings her love for connecting with others to her work. With a relevant degree, she crafts compelling content that informs and inspires, showcasing her unique perspective and her commitment to making a difference.
Discussion Comments
By jmc88 — On Jul 02, 2011

@JimmyT - I have a friend that works in the unloading dock for one of the major wholesalers. He has told me that since they receive so many items on a daily basis, it is nearly impossible to check each shipment for quality.

They can usually check to make sure all the necessary boxes arrived, but that doesn't always happen. Once they start unloading boxes there are usually quite a few broken items from what he tells me. Depending on the agreement from the supplier, sometimes the products will be replaced, but sometimes the store has to eat the cost.

I'm sure a clothing store receives far fewer damaged items compared to some other businesses, but overall I would say that missing and damaged inventory could be a considerable cost to a store if there isn't a strict inventory control procedure in place.

By Emilski — On Jul 01, 2011

Does anyone have any experience using inventory control software?

I run my own hardware store, so I have thousands of different types of items I have to keep track of. Thus far, I've used a basic spreadsheet on my computer, but I am starting to think that maybe a more professional program would give me a more structured and effective inventory system.

What is the basic price of a program that can keep track of a small business' inventory, and would it really be worth the investment? Plus, how intuitive are they to use? I'm not a computer expert by any means.

By JimmyT — On Jun 30, 2011

@TreeMan - I agree with most of what you are saying; however, I think as a business grows making solid connections with employees becomes more and more difficult.

Like the article mentions, merchandise shows up on a balance sheet, and for large corporations with shareholders, sometimes extreme measures like bag searches are necessary to meet the bottom line.

I've never been directly involved in operating a store of any kind, but I would like to know how much a store loses every year due to simply misplacing items or receiving damaged items.

By TreeMan — On Jun 29, 2011

The article spends of good deal of time discussing how employees factor into a business' inventory. As a former manager, I can say that employee satisfaction is an oft overlooked factor that plays into whether someone will steal.

Of course, an employee being happy won't always lead to them being a perfect employee. However, if someone knows that your trust in them will be broken if they get caught stealing an item, they will usually think twice about taking something.

In today's world, I think we spend too much time worrying about stopping things like theft after they happen instead of taking preventative measures. Does anyone else have experience with this issue?

H. Bliss
H. Bliss
Heather Bliss, a passionate writer with a background in communication, brings her love for connecting with others to her...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.