74 Ways Your Inventory Value and COGS are wrong

Inventory accounting isn’t just about tracking what sits in your warehouse. It drives your margins, cash flow, taxes, and valuation. Yet, most businesses mess it up—often in dozens of small but costly ways. Below are 74 of the most common mistakes we see.

Setup Errors

1. Using the wrong costing method (FIFO vs. LIFO vs. weighted average).
2. Not aligning accounting method with IRS elections.
3. Failing to set SKU-level tracking.
4. Treating all inventory as one bucket.
5. Ignoring landed costs.
6. Not reconciling beginning inventory to prior-year ending inventory.
7. Not mapping chart of accounts properly.
8. Using cash basis when accrual is required.
9. Mixing COGS with operating expenses.
10. Ignoring consignment inventory.

Purchasing Mistakes

11. Not capturing vendor deposits as assets.
12. Recording purchases as expenses.
13. Double-counting freight.
14. Excluding tariffs or duties.
15. Not capitalizing packaging.
16. Misclassifying returned goods from suppliers.
17. Skipping purchase accruals at period end.
18. Failing to reconcile purchase orders to invoices.

Inventory Tracking Issues

19. No cycle counts.
20. Relying solely on system quantities.
21. Ignoring shrinkage.
22. Not writing off obsolete stock.
23. Overstating slow-moving SKUs.
24. Skipping negative inventory adjustments.
25. Not tracking lot numbers or expiration dates.
26. Treating samples as inventory.
27. Ignoring promotional giveaways.
28. Not segregating damaged goods.

Production & Assembly Errors

29. Not tracking raw materials separately.
30. Failing to use bill of materials.
31. Overstating WIP (work in progress).
32. Understating finished goods.
33. Not absorbing labor into COGS when required.
34. Overhead allocation errors.
35. Ignoring scrap.
36. Recording production twice.
37. Failing to reconcile production runs.

Sales & COGS Errors

38. Recognizing revenue without relieving inventory.
39. Delayed COGS recognition.
40. Misclassifying shipping as COGS.
41. Not matching returns with inventory add-backs.
42. Forgetting to restock canceled orders.
43. Using estimates for COGS instead of actuals.
44. Recording COGS to the wrong period.
45. Ignoring Amazon or 3PL inventory timing.
46. Skipping adjustments for lost-in-transit goods.

Valuation Errors

47. Not applying lower of cost or market/net realizable value.
48. Overstating inventory to boost profits.
49. Failing to impair obsolete SKUs.
50. Treating promotional bundles incorrectly.
51. Not allocating landed costs consistently.
52. Ignoring foreign currency fluctuations.
53. Overvaluing consigned inventory.
54. Counting safety stock twice.

Technology Gaps

55. Relying on spreadsheets.
56. Not integrating POS with accounting.
57. Misconfigured ERP rules.
58. No audit trail on adjustments.
59. Not reconciling 3PL reports.
60. Double integration feeds (Shopify, Amazon, ERP).
61. Ignoring time lags between systems.

Period-End Problems

62. Not performing physical counts.
63. Recording adjustments without approval.
64. Carrying “suspense” balances month-to-month.
65. Closing books without reconciling inventory to GL.
66. Failing to accrue freight-in.
67. Misstating cut-off for shipments in transit.
68. Not tying subledger to control account.
69. Reversing accruals incorrectly.
70. Leaving unadjusted variances open.

Strategic Oversights

71. No documented inventory policy.
72. Not training staff on accounting impacts.
73. Treating inventory as afterthought vs. working capital.
74. Ignoring the tax planning impact of inventory methods.

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Bottom line: Inventory accounting errors compound. Fixing them requires clean setup, tight controls, reconciliations, and consistent policies. If your numbers seem off, they probably are.