Retail Inventory Guide
Retail Purchasing & Receiving: Where Inventory Accuracy Really Begins
A clean inventory count cannot fix a broken purchasing and receiving process. Accurate retail inventory starts with knowing what was ordered, what actually arrived, what it cost, and what was entered into the POS.
Use this guide to improve purchase orders, vendor records, receiving, shortages, overages, damaged merchandise, substitutions, costs, pack sizes, employee controls, and inventory updates.
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Quick Answer
Retail purchasing determines what a store intends to buy, while receiving records what the store actually receives. A good purchasing and receiving process compares purchase orders with deliveries, identifies shortages, overages, damage and substitutions, verifies product and vendor information, checks costs and quantities, and updates inventory based on what actually arrived.
The Purchasing-to-Inventory Chain
Inventory Can Become Wrong Before the Product Ever Reaches the Shelf
A retailer can have excellent checkout procedures and still have inaccurate inventory if ordering and receiving are not controlled.
Order
Determine what is needed and create a purchase order containing the expected products, quantities, pack sizes, costs, and vendor.
Deliver
The vendor ships merchandise. The shipment may or may not exactly match the original purchase order.
Receive
Employees compare the physical delivery with the purchase order and record what actually arrived.
Verify
Review quantities, shortages, damage, substitutions, costs, pack sizes, and other discrepancies before inventory is finalized.
Purchasing & Receiving Answer Center
What Is the Difference Between Purchasing and Receiving?
Purchasing records what the retailer plans to buy. Receiving records what the retailer actually receives.
A purchase order might contain 24 units of a product. If the vendor delivers only 20, the receiving process should record 20 rather than automatically adding all 24 units to inventory.
The same principle applies to damaged products, substitutions, incorrect pack sizes, cost differences, missing cartons, overages, and other discrepancies.
When the POS accurately connects purchasing and receiving, management gains a clearer picture of what is on order, what has arrived, what is still outstanding, and what should actually be available for sale.
Real Retail Example
You Ordered 24. The Vendor Delivered 20.
If the POS adds 24 units to inventory because that is what the purchase order says, the store begins with a four-unit inventory error.
The receiving employee should verify what physically arrived and record the discrepancy according to the retailer's procedures.
Management may then need to determine whether the remaining four units are backordered, canceled, credited, or still expected.
Explore Purchase OrdersReceiving Questions
- How many units were ordered?
- How many actually arrived?
- Are any cartons missing?
- Was anything damaged?
- Were products substituted?
- Did the cost change?
- Is the pack size correct?
- Is anything backordered?
- Does the invoice match the delivery?
Receiving Problems
Common Receiving Errors That Can Make Inventory Wrong
Receiving the Purchase Order Instead of the Shipment
Employees assume everything ordered arrived and receive the full purchase order without verifying the physical merchandise.
Wrong Item
A product is received against an incorrect SKU or UPC, increasing one inventory item while leaving the correct item unchanged.
Wrong Pack Size
A case, pack, bottle, unit, or inner pack is interpreted incorrectly, creating a much larger quantity error.
Damage Not Recorded
The shipment contains damaged or unsellable products but the full quantity is entered as sellable inventory.
Vendor Substitution
The vendor sends a different product or size and employees receive it as though the original item arrived.
Cost Changes Missed
A vendor changes cost but the retailer does not review how the change affects product cost, pricing, or margin.
Receiving Procedure
A Better Retail Receiving Workflow
Receiving should be a controlled inventory process rather than simply unloading boxes.
- Identify the vendor and purchase order
- Verify the shipment belongs to the store
- Count what physically arrived
- Compare quantities with the purchase order
- Identify shortages and overages
- Inspect for damaged merchandise
- Verify product identity and UPCs
- Check pack sizes and units
- Review substitutions
- Review cost differences where appropriate
- Record what actually arrived
- Document unresolved discrepancies
Purchase Order vs Delivery
What Should Be Compared During Receiving?
| Purchase Order | Physical Delivery | What to Check |
|---|---|---|
| Product ordered | Product delivered | Correct item, SKU, UPC, size, and description |
| Quantity ordered | Quantity received | Shortage, overage, or exact match |
| Pack size | Pack size delivered | Case, inner pack, unit, bottle, or other selling unit |
| Expected cost | Current vendor cost | Cost changes that may require review |
| Expected product | Substitute product | Whether the substitution should be accepted |
| Sellable quantity | Damaged quantity | Whether damaged merchandise should enter sellable inventory |
| Expected delivery | Backordered merchandise | Whether remaining quantities are still expected |
Vendor Management
Good Purchasing Starts With Clean Vendor and Product Data
Purchasing becomes harder when supplier information, vendor item numbers, pack sizes, costs, and product records are inconsistent.
Retailers should establish procedures for who can create products, change vendors, update costs, change pack sizes, and modify purchasing information.
Useful Vendor Information May Include:
- Primary vendor
- Alternate vendors
- Vendor item number
- Purchase cost
- Pack size
- Order unit
- Minimum order
- Lead time
- Purchase history
- Contact information
Costs & Margins
A Vendor Cost Change Can Become a Margin Problem
If product costs change but selling prices or management reports do not reflect those changes appropriately, the retailer may not realize that margins have changed.
Receiving can be an important point for identifying cost differences and determining whether management review is required.
Explore POS ReportingExample
Your Cost Increased
A product previously cost $10 and now costs $11.
If the selling price stays the same, the gross margin changes.
The retailer should have a defined process for reviewing meaningful cost changes rather than discovering them later through weaker margins.
Barcode Receiving
Barcodes Can Help Verify What You Are Receiving
Compatible barcode scanning can help employees identify products during receiving and reduce manual item lookup.
The barcode itself does not guarantee accuracy. The UPC must still be connected to the correct product record, pack size, and inventory item.
Explore Barcode Inventory
Employee Accountability
Who Is Allowed to Receive and Change Inventory?
Receiving affects inventory quantity, costs, purchasing, vendor records, and financial decisions.
Retailers should determine which employees can receive products, edit purchase orders, change costs, create products, modify pack sizes, and make inventory adjustments.
Management Should Be Able to Ask:
- Who received this shipment?
- When was it received?
- What quantity was entered?
- Were there shortages?
- Who changed the cost?
- Who created the product?
- Who adjusted inventory afterward?
- Was the purchase order closed correctly?
Receiving Use Cases
Real Problems a Receiving Process Should Catch
Case 1
Short Shipment
The retailer ordered 24 units but received 20. The receiving record should reflect what physically arrived and preserve the unresolved difference for review.
Case 2
Wrong Pack Size
The employee thinks a case contains 24 units when the new vendor pack contains 12. An incorrect conversion could double inventory.
Case 3
Damaged Product
Twenty products arrive but three are damaged. Procedures should determine whether all 20 enter inventory or only the 17 sellable units.
Case 4
Unexpected Cost Increase
The vendor invoice shows a higher cost. Management may need to review pricing, margin, and future purchasing decisions.
Case 5
Vendor Substitution
A different size or brand arrives. Receiving it under the original item could create incorrect product and inventory information.
Case 6
Duplicate Product
An employee creates a new item because the existing product cannot be found. Inventory and sales are now divided between two records.
Multi-Store Purchasing
Purchasing Gets More Complicated With Multiple Locations
A multi-store retailer may need to decide whether products are purchased centrally, purchased by individual locations, transferred between stores, or managed using a combination of these approaches.
Management also needs visibility into inventory already available elsewhere before placing unnecessary orders.
Explore Multi-Store InventoryBefore Ordering, Ask:
- Which store needs the product?
- Does another store already have excess inventory?
- What is already on order?
- Who is responsible for purchasing?
- Should the item be transferred instead?
- Are costs consistent across locations?
- Are product records standardized?
Problem Guide
When Inventory Is Wrong, Start With the Transaction That Changed It
| Problem | Possible Cause | What to Review |
|---|---|---|
| POS quantity is higher than physical inventory | Short receiving, shrink, damage, returns, count errors | Receiving and inventory movement history |
| POS quantity is lower than physical inventory | Receiving omitted, duplicate product records, wrong UPC | Receiving, item records, and sales history |
| Inventory changes dramatically after delivery | Wrong pack size or quantity | Purchase unit and receiving conversion |
| Margins suddenly decline | Vendor cost increased | Receiving cost and selling price |
| Same item appears twice | Duplicate item created during receiving | UPC, SKU, vendor item number, product records |
| Stores keep overordering | Poor visibility into stock and open orders | On-hand, on-order, sales movement, and multi-store inventory |
After Receiving
Receiving Is Not the End of Inventory Control
After products enter inventory, retailers still need accurate checkout, returns, adjustments, transfers, stock counts, barcode records, and reporting.
This is why purchasing and receiving should be connected to the larger inventory management process rather than treated as isolated back-office tasks.
Retail Inventory Management Stock Take →The Inventory Chain
- Product setup
- Vendor setup
- Purchase order
- Receiving
- Barcode and labeling
- Checkout
- Returns
- Adjustments
- Transfers
- Stock counts
- Reporting
BizTracker Infinity
Connect Purchasing and Receiving With the Retail POS
BizTracker Infinity can support purchasing, receiving, inventory, barcode workflows, stock counts, reporting, employee controls, and multi-store operations depending on configuration.
Purchase Orders
Create and manage purchasing workflows around vendors, products, quantities, costs, expected deliveries, and inventory needs.
Purchase Order Software →Inventory Management
Connect receiving with product quantities, adjustments, stock counts, barcode workflows, reporting, and inventory investigation.
Inventory Management →Multi-Store Inventory
Review location inventory, transfers, purchasing, receiving, and centralized product information across multiple stores.
Multi-Store Inventory →Retail Operations Since 1996
Software Cannot Fix a Receiving Process Nobody Follows
BizTracker helps retailers look at the complete workflow, including software, product data, purchasing, receiving, employee procedures, barcode hardware, inventory counts, reporting, training, and support.
Get a Free POS & Inventory ReviewPurchasing & Receiving Questions
Frequently Asked Questions
What is retail purchasing?
Retail purchasing is the process of deciding what products to buy, selecting vendors, determining quantities, creating purchase orders, reviewing costs, and planning when merchandise should arrive.
What is retail receiving?
Retail receiving is the process of verifying and recording merchandise delivered by a vendor. It may include checking products, quantities, pack sizes, shortages, overages, damage, substitutions, costs, and other discrepancies.
What is the difference between purchasing and receiving?
Purchasing records what the retailer intends to buy. Receiving records what actually arrived. The two processes should be compared so inventory reflects the physical delivery rather than simply the original order.
Why does receiving affect inventory accuracy?
Receiving is one of the transactions that adds products to inventory. Incorrect quantities, items, pack sizes, or product records can create inventory errors before merchandise reaches the shelf.
Should employees receive the entire purchase order automatically?
Retailers should normally verify the physical shipment according to their receiving procedures rather than assuming everything ordered was delivered. The appropriate workflow depends on the retailer and system configuration.
What happens when a vendor ships less than ordered?
The receiving process should record what actually arrived and identify the unresolved quantity according to the retailer's procedures. The remaining merchandise may be backordered, canceled, credited, or otherwise resolved with the vendor.
How should damaged merchandise be handled during receiving?
Retailers should have a defined procedure for identifying damaged or unsellable merchandise and determining whether it enters inventory, is returned, receives a vendor credit, or is handled another way.
Why are pack sizes important during receiving?
Confusing a case, inner pack, bottle, unit, or other purchase unit can create large inventory errors. Product and vendor records should clearly define how merchandise is purchased and sold.
Can barcode scanners help with receiving?
Compatible barcode scanners may help identify products during receiving and reduce manual lookup. Accuracy still depends on clean product records, correct UPCs, appropriate hardware, software configuration, and employee procedures.
Should receiving employees be able to change product costs?
Access should depend on job responsibility and company procedures. Retailers may choose to restrict cost changes, product creation, inventory adjustments, or other sensitive functions to authorized employees.
Can BizTracker Infinity manage purchase orders?
BizTracker Infinity can support purchase-order and receiving workflows including vendors, products, quantities, costs, receiving, and inventory updates depending on configuration.
Can BizTracker support multi-store purchasing and receiving?
BizTracker Infinity can support multi-store inventory, purchasing, receiving, transfers, location-level quantities, reporting, and centralized product information depending on configuration.
What should I review if inventory is always wrong after receiving?
Review purchase orders, actual delivery quantities, pack sizes, UPCs, duplicate product records, damaged merchandise, substitutions, employee permissions, inventory adjustments, and the procedures employees use when receiving shipments.
Retail Purchasing, Receiving & Inventory Resources
Fix the Process Before Fixing the Number
Is Receiving One of the Reasons Your Inventory Is Wrong?
BizTracker can review purchasing, receiving, product records, vendor information, barcodes, stock counts, employee controls, reporting, hardware, and multi-store workflows to help identify where inventory problems are developing.
Get My Free POS & Inventory Review Call (877) 767-1249Need help with purchasing, receiving, inventory, or barcode workflows? Chat with a BizTracker specialist.