For high-volume distributors in the building materials industry, accurate inventory is everything. With thousands of SKUs across multiple locations — from lumber to fittings to specialty concrete products — the potential for stock discrepancies increases rapidly. That’s why inventory audits aren’t just a compliance activity — they’re essential to protecting your margins and keeping operations running smoothly.
If you’re just getting started with formal inventory audits or scaling operations quickly, this beginner’s guide breaks down everything you need to know.
What Is an Inventory Audit?
An inventory audit is the process of physically verifying the quantity and condition of stock on hand and comparing it to what’s recorded in your system. It’s used to:
Identify shrinkage or loss
Catch data entry or receiving errors
Validate inventory accuracy for reporting and decision-making
Ensure compliance with financial and tax regulations
For high-volume distributors, audits are crucial for keeping your ERP system reliable — because decisions are only as good as the data behind them.
When Should Audits Be Performed?
There are three main types of audits, and many distributors use a mix of all three:
Annual or Full Physical Audits
A complete count of all items, usually at year-end or during slower periods.
Best for compliance and overall accuracy.
Cycle Counts
Smaller, more frequent counts of select items — often high-turnover or high-value.
Best for keeping daily accuracy up without disrupting operations.
Spot Checks
Random, ad-hoc checks to verify inventory in specific zones or for certain SKUs.
Best for addressing known problem areas or verifying system flags.
Common Challenges Faced by High-Volume Distributors
Stock spread across multiple yards
Time-consuming manual counts
Discrepancies between physical and system data
Downtime during audits impacting daily operations
Limited tracking of aged or damaged stock
These challenges increase as your volume grows — unless your audit process evolves too.
How to Conduct a Basic Inventory Audit
Choose the Right Time
Avoid peak delivery hours or seasons. If using cycle counts, build them into your weekly workflow.
Define the Scope
Are you auditing specific categories? Locations? High-value SKUs? Clear scope ensures efficient use of time.
Use Scanners or Mobile Devices
Replace pen-and-paper counts with barcode scanning apps tied directly to your ERP. This minimizes manual entry errors.
Cross-Check with System Records
Identify variances between counted and recorded quantities. Investigate the root cause — receiving errors, theft, data entry?
Update Inventory with Adjustments
All changes should be logged in your ERP system with reasons and supporting documentation. This creates a clear audit trail.
How ERP Software Simplifies the Process
An ERP platform built for the building materials industry supports inventory audits by:
Automating cycle count schedules
Assigning counts by product category, turnover rate, or location
Providing real-time variance reports
Tracking audit histories for compliance and analytics
Enabling mobile audit execution with barcode support
This reduces the time and labor needed — and ensures consistent processes across all locations.
Pro Tips for Scaling Audits
Start with high-turnover and high-risk SKUs
Train teams on consistent audit methods
Use audit results to improve receiving and stocking workflows
Track audit KPIs like accuracy rate, time per count, and variance trends
As your operations grow, automated, ERP-integrated audits will become essential for maintaining control and trust in your inventory data.
Inventory audits aren’t just about compliance — they’re a proactive strategy for smarter, more profitable inventory management. The earlier you build them into your operations, the easier it becomes to scale efficiently and confidently.
