Stock Verification Methods

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Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 06, 2023

The two main methods of stock verification are:

  • Annual stock verification
  • Continuous stock verification

Annual Stock Verification

Annual stock verification is also known as periodical stock verification. Under this method, the whole of the stock is verified (audited) at the end of a given period. In normal circumstances, this is the close of the financial year.

A stock audit is also required at this time because the stock must be included in the balance sheet.

Usually, stock verification lasts several days, during which storehouse operations are usually suspended.

Advantages of Annual Stock Verification

Annual stock verification benefits from several advantages, including:

  • Simplicity
  • Convenience
  • Effectiveness
  • No extra staff required

Disadvantages of Annual Stock Verification

The method also suffers from the following disadvantages:

  • It may take several days if the storehouse is medium or large
  • Extra staff are needed to conduct and complete the verification process
  • All discrepancies are detected only once, leaving no room for corrections

For small businesses, the annual stock verification method is suitable. However, for medium or large businesses, it is usually ineffective.

Continuous Stock Verification

Continuous stock verification is also known as perpetual stores verification.

This type of stock verification is carried out continuously throughout the year. Each year, a verification program is prepared at the beginning of the year, and the verification process is performed according to the program.

The program is organized such that at least once a year, every item is verified. Care is taken to check other items more regularly, particularly valuable and/or fast-moving items.

The program is kept strictly confidential. It is also necessary that store records are kept in detail and are complete and up to date. The failure of records usually leads to the overall failure of the verification program.

Advantages of Continuous Stock Verification

The first merit of continuous stock verification is that no closure of the operation of the storehouse is required.

Additionally, no extra staff are required to conduct and complete the stock verification.

Another advantage is that discrepancies are promptly detected and the necessary corrective measures taken. In annual stock verification, such discrepancies are not identified until after up to 12 months.

Continuous stock verification also benefits from the fact that permanent staff are entrusted with the job of performing the verification work throughout the year.

Finally, the method can be used effectively and advantageously by large storehouses. For small storehouses, continuous stock verification is costlier than annual stock verification.

However, a medium-sized storehouse is likely to benefit from continuous stock verification.

Stock Verification Methods FAQs

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About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.