Warehouse Accounting: How to Set It Up From Scratch

Short answer: Warehouse accounting (inventory accounting) means recording every receipt, shipment, transfer and write-off of goods with a document, per item (SKU) and per warehouse, so you always know exact stock in units and in money. It rests on three rules: no movement without a document, one costing method (FIFO or weighted average), and regular stock counts. Once you pass roughly 200–300 SKUs or run more than one warehouse, moving from Excel to inventory software or an ERP system pays off.

The system says 40 units, the shelf holds 32. A supplier delivery was never entered because the storekeeper would "do it later". At month-end, warehouse and accounting figures disagree again. If this sounds familiar, the problem is rarely the people; it is how warehouse accounting is set up. This guide shows how to build warehouse accounting from scratch, with worked examples in Uzbek sum.

What is warehouse accounting?

Warehouse accounting is a system that records every movement of inventory (receipt, issue, transfer, write-off) on the basis of documents and can show the exact stock balance, in quantity and in value, at any moment.

It works on two levels:

• Quantity (operational) accounting. For storekeepers and sales: how many units, kilograms or metres you have, in which warehouse and on which shelf.
• Value (financial) accounting. For the accountant and the owner: what the inventory is worth in sum, what the goods sold cost, and how much profit is left.

Both must come from the same documents; a storekeeper's notebook and a separate 1C database will always drift apart.

Why does a business need warehouse accounting?

Accurate warehouse accounting stops cash from freezing in stock, reveals shortages early and lets you promise customers only what you actually have.

• Working capital control. Much of a trading company's assets sit in stock; items that have not sold for months keep that cash stuck.
• Early detection of shortages. When nothing moves without a document, discrepancies are easy to trace.
• Correct cost and profit. Wrong cost of goods distorts both pricing and profit.
• Tax and reporting requirements. Receipt and issue documents, including electronic invoices, have to reconcile with inventory records.

What documents are used in warehouse accounting?

Every stock movement needs its own document: goods that arrive without one do not exist for accounting, and goods that leave without one become a shortage.

The core set:

• Goods receipt note. Created when goods are received from a supplier: quantity, price, batch and who accepted them. Match it against the supplier's e-invoice from Didox or another e-document operator.
• Delivery note (goods issue). For shipments to customers or transfers to a shop.
• Internal transfer document. When goods move from a central warehouse to a branch. A transfer is a movement too, and it needs a document.
• Return documents. Separate ones for customer returns and returns to suppliers.
• Write-off act. For breakage, expired or defective goods, with the reason and the signatures of a committee.
• Stock count sheet and variance report. Record the difference between counted and book stock.

Check the current requirements for document forms and retention periods with your accountant. We cover electronic invoices in a separate article: e-invoices, Didox and ERP integration.

How do you set up warehouse accounting from scratch?

Setting up warehouse accounting starts with a clean product catalogue, followed by an opening stock count, a document flow, named responsible people and control rules.

1. Clean up the product catalogue. Each item gets one name, an SKU, a unit of measure and a barcode. "Red T-shirt L" and "T-shirt, red, size L" must not become two items. More on this: what an SKU is and how it differs from an article number.
2. Define warehouses and locations. How many warehouses, and how zones and shelves are named (for example A-03-2: zone A, row 3, shelf 2).
3. Run an opening stock count. Count everything and load those figures as opening balances. Accounting that starts from "approximate" stock is wrong from day one.
4. Choose a costing method. FIFO or weighted average. Agree it with your accountant and write it into the accounting policy.
5. Document the flow. Who receives goods, who authorises shipments, how quickly documents are entered. The core rule: if goods moved, the document is posted the same day.
6. Assign material responsibility. Each warehouse has a named responsible person with a material liability agreement.
7. Set minimum stock levels. Calculate a reorder point for key items (formula below).
8. Create a control schedule. Partial counts weekly or monthly, a full count at least once a year, stock reports daily.

How is cost calculated: FIFO or weighted average?

Under FIFO (First In, First Out) the cost of the earliest batch is expensed first; under the weighted average method the costs of all batches are averaged. The international standard IAS 2 allows these approaches for inventories and prohibits LIFO. Which method your company uses is set by its accounting policy, so confirm it with your accountant.

Example. You bought two batches of the same item:

• Batch 1: 100 units at 10,000 sum each (1,000,000 sum in total);
• Batch 2: 100 units at 12,000 sum each (1,200,000 sum in total).

You then sold 150 units.

• FIFO: cost of goods sold = 100 × 10,000 + 50 × 12,000 = 1,600,000 sum. Remaining stock: 50 units at 12,000, i.e. 600,000 sum.
• Weighted average: average cost = 2,200,000 / 200 = 11,000 sum. Cost of goods sold = 150 × 11,000 = 1,650,000 sum. Remaining stock: 50 units at 11,000, i.e. 550,000 sum.

When purchase prices are rising, FIFO shows lower cost of goods and higher book profit, while the average method smooths things out. Issue goods physically in FIFO order too. For goods with a shelf life, use FEFO (First Expired, First Out): whatever expires first leaves first.

How do you run a stock count?

A stock count (inventory count) is a physical count of goods compared with book stock, with the differences (shortage or surplus) formally recorded. It is required at least before annual reporting and when the materially responsible person changes, but in practice you should count far more often.

Steps:

1. Committee. Management appoints a count committee; the storekeeper takes part but never counts alone.
2. Close open documents. Post all receipts and issues first and stop movement during the count.
3. Count. Zone by zone, shelf by shelf. A barcode scanner or a phone app cuts errors sharply.
4. Compare. Counted stock is compared with book stock and a variance list is produced.
5. Investigate. Check every significant variance: an unposted document, mis-picking between similar items, breakage or real loss.
6. Post the result. An act is signed, and differences are written off or added to stock.

Cycle counting suits larger warehouses: instead of closing the whole site, you count part of the range every week. It works well with ABC analysis: A items, which bring most of the revenue, are counted often, C items less often.

How do you set minimum stock and a reorder point?

A reorder point is the stock level at which a new purchase order should be placed; it is based on average daily usage, supplier lead time and safety stock.

Basic formula:

• Reorder point = average daily sales × lead time (days) + safety stock.

Example: you sell 20 units a day on average, the supplier delivers in 7 days and you keep 60 units of safety stock. Reorder point = 20 × 7 + 60 = 200 units. When stock drops to 200, you order.

Set a maximum level as well, or "just in case" purchases will fill the warehouse and freeze cash. In an ERP system, min/max rules create purchase requests automatically and alert the purchasing team.

What do barcodes and product marking give you?

Barcodes replace manual searching and typing with a one-second scan, which sharply cuts errors in receiving, picking and stock counts.

• Receiving: a scan is checked against the purchase order and differences are flagged instantly.
• Picking and shipping: if the wrong item is scanned, the system warns you. Mix-ups stop here.

In Uzbekistan, "Asl Belgisi" digital marking is mandatory for a number of product groups: each unit gets a unique code tracked in a state system, so your warehouse accounting must record those codes on receipt and on disposal. Details: our guide to Asl Belgisi digital marking.

How do you manage several warehouses?

Each warehouse is kept in the system as a separate location, and every transfer between them is posted as its own document with an "in transit" status.

Practical rules:

• Consolidated and per-site stock. The owner sees total stock, a branch manager sees only their own warehouse.
• Two-step transfers. The sending warehouse confirms "shipped", the receiving one confirms "received". In between, goods are "in transit" and cannot vanish.
• Access rights. A branch storekeeper must not be able to change another warehouse's stock.

This matters most in wholesale. For example, Timsoll manages more than 7,000 SKUs in Odoo, a volume no one can track by hand.

Where does a warehouse lose money?

Most warehouse losses come not from theft but from sloppy records: unposted documents, mix-ups, expired goods and dead stock.

The usual suspects:

• Movements without documents. "I'll hand it over now and we'll paper it later" usually never gets papered.
• Receiving errors. The supplier brought 96 units instead of 100, but 100 were received per the invoice.
• Mix-ups between similar items. A different colour or size gets shipped: one item shows a shortage, the other a surplus.
• Dead stock. Items with no movement for 6–12 months take up space and tie up cash.
• Unrecorded returns. Customer returns never get received back into stock.

Excel or inventory software: when should you switch?

Excel can be enough for 100–200 items, one warehouse and one or two staff; with several warehouses, branches, batches or expiry dates you need dedicated software or an ERP.

Excel's limits:

• No real time. A cashier has sold the item, but the storekeeper has not updated the file yet.
• No history or control. You cannot see who changed which number and when.
• Batches, serial numbers and expiry dates are nearly impossible to track.

Standalone inventory or retail apps (such as MoySklad or POS systems) launch quickly and suit a small shop. ERP systems (Odoo, 1C, SAP) connect the warehouse with sales, purchasing, manufacturing and accounting in one database; if you are growing, start there to avoid migrating twice. Comparisons: Odoo vs MoySklad, moving from Excel to ERP: why and when.

How does Odoo handle warehouse accounting?

The Odoo Inventory app keeps warehouse accounting in the same database as sales, purchasing, manufacturing and accounting: each movement is entered once, and both quantities and values update automatically.

Key features:

• Multiple warehouses and locations. Unlimited warehouses, zones, shelves and transfers between them.
• Costing methods. FIFO, average cost (AVCO) and standard price; with automated valuation, accounting entries are created for you.
• Removal strategies. FIFO, LIFO, FEFO and closest-location picking.
• Lots, serial numbers and expiry dates. Essential for food, pharmaceuticals and electronics.
• Min/max replenishment rules. When stock falls below minimum, Odoo proposes a purchase or manufacturing order.
• Barcode app. Receiving, picking and counting with a scanner or phone (Enterprise edition).
• Stock counts. Full and cycle counts, with differences posted automatically.

More on the module: Odoo Inventory: digitising warehouse management. Official overview: odoo.com/app/inventory.

How can Deep Vision help?

Deep Vision is an official Odoo Gold Partner in Tashkent; we implement warehouse accounting end to end, from process analysis to Odoo configuration, data migration and staff training.

• Process analysis: we map your document flow and find where losses come from.
• Configuration: warehouses, locations, costing, min/max rules, barcodes, access rights.
• Data migration: a cleaned catalogue from Excel or 1C, with opening balances.
• Training and support for storekeepers, sales managers and accountants.

Our team includes 7 certified Odoo specialists, and 26 client projects are listed in the Odoo partner catalogue. Standard Sales and Inventory modules often go live in 6–8 weeks; more complex projects take 2–6 months. See our portfolio and the Odoo implementation service.

Want to know what to fix in your warehouse first? Fill in a short brief, and we will review your process and give specific recommendations.

Warehouse accounting checklist

• Every item has one name, an SKU, a unit of measure and a barcode.
• Opening balances come from an actual count.
• A costing method is chosen and written into the accounting policy.
• There are documents for receipts, issues, transfers, returns and write-offs.
• Every document is posted on the day of the movement.
• Each warehouse has a materially responsible person.
• Key items have minimum and maximum stock levels.
• A cycle count schedule exists.
• Goods with a shelf life are issued FEFO.
• Warehouse, sales and accounting share one database or a reliable integration.

Frequently asked questions

How is warehouse accounting done?

By documenting every stock movement (receipts, issues, transfers, returns, write-offs), keeping one SKU catalogue, using one costing method and checking balances with regular stock counts.

Can I keep warehouse accounting in Excel?

For a small operation, yes: one warehouse and 100–200 items. But Excel lacks real-time stock, safe shared editing, batch and expiry tracking and change history, so a growing business will need inventory software or an ERP.

What is the difference between FIFO and weighted average cost?

FIFO expenses the cost of the earliest batch first, while weighted average blends the costs of all batches. With rising prices, FIFO shows a lower cost of goods sold. Choose the method with your accountant and fix it in your accounting policy.

How often should I count stock?

Run a full count at least once a year before annual reporting and whenever the materially responsible person changes. In practice, expensive and fast-moving items should be cycle-counted weekly or monthly.

How do I calculate minimum stock?

Reorder point = average daily sales × lead time + safety stock. With 20 units a day, a 7-day lead time and 60 units of safety stock, reorder at 200 units.

Which inventory software is best?

A small shop may be fine with a simple inventory or POS app. With several warehouses, branches, manufacturing or a link to accounting, an ERP such as Odoo works better because everything shares one database.

How long does it take to implement inventory in Odoo?

Standard Sales and Inventory modules often go live in 6–8 weeks. Projects with several warehouses, manufacturing, integrations and large data migrations usually take 2–6 months.

What should I do when a stock count shows a shortage?

First find the cause: an unposted document, a mix-up between items, a receiving error or a real loss. Then record the result in an act and fix the root cause: post documents the same day, scan barcodes and make material responsibility clear.

Conclusion

Warehouse accounting takes discipline more than complexity: one product catalogue, a document for every movement, one costing method and regular stock counts. With those in place, balances match and shortages show up early. When your range and number of warehouses outgrow Excel, it is time for an ERP.

Need help getting your warehouse in order? Fill in the brief for a free consultation or call +998 77 093 00 07.