Inventory Management Process: Eight Steps and the Records to Keep

The process has eight steps: plan, order, receive, store, issue, adjust, count and review, and then back to plan. Each step leaves one record, and each record can be tested as pass or fail. The table is the whole process on one page. It works as a flow chart or a slide.

Plan → Order → Receive → Store → Issue → Adjust → Count → Review → (back to Plan)

Step 1 needs a number. The reorder point is daily usage multiplied by lead time, plus safety stock. Lead time is the days between placing an order and receiving the goods. Safety stock is the buffer held against late deliveries or sudden demand.

Our worked example uses illustrative numbers. Usage of 20 units a day, a 5-day lead time and 30 units of safety stock give (20 × 5) + 30 = 130 units. When book stock falls to 130, you order.

To set usage from sales history instead of guesswork, see demand planning.

Step lists differ because no standard exists. Yours should include an adjust step because the GST stock account has a column for losses and write-offs, which Rule 56 requires.

The law is specific. As of November 2026, Rule 56 of the Central Goods and Services Tax (CGST) Rules, 2017, published by the Central Board of Indirect Taxes and Customs, requires every GST-registered business except one paying tax under the composition scheme in section 10 of the CGST Act, which taxes turnover at a flat rate, to keep stock accounts. Regular taxpayers must comply. They must hold:

• the opening balance;
• receipts;
• supplies;
• goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample;
• the balance of stock, including raw materials, finished goods, scrap and wastage.

The same rule says entries must not be erased, effaced or overwritten. Records kept electronically must keep a log of every entry edited or deleted.

Our recommendation follows from that. Correct a wrong figure with a new adjustment entry that shows the cause. Never type over the old number. If you are outside Rule 56, the same eight records are still a sound routine.

If you can enter the pending bills before the count, do so and enter the shelf count as it is. If they are still pending, enter shelf count minus pending purchase quantity plus pending sales quantity. That second case is the rule in Tally accounting software's own help for its physical stock voucher, and it prevents the count from creating false gains or losses.

Tally names two causes of a closing-stock mismatch: inaccurate stock records, and theft, damage and loss.

Here is our worked example for the still-pending case, with illustrative numbers:

• The shelf holds 1,050 units.
• 100 units arrived, but the purchase bill is not yet entered.
• 40 units were dispatched, but the sales bill is not yet entered.
• The quantity to enter is 1,050 − 100 + 40 = 990.

After that entry, book stock is 990. Entering the pending purchase bill adds 100, giving 1,090. Entering the pending sales bill removes 40, giving 1,050. That equals the shelf.

If you had typed 1,050, the same two bills would take book stock to 1,110. That is a false gain of 60 units.

Run these tests before and during every count. Each has a pass and a fail:

1. Pending bills listed by item. Pass: a list of unbilled receipts and dispatches with quantities. Fail: "we will fix it later".
2. Movements controlled during the count. Pass: every movement has a dated slip. Fail: goods move with no paperwork.
3. Unit of measure stated. Pass: the count sheet and the books use the same unit, such as pieces or cases. Fail: the shelf is counted in cartons and the books hold pieces.
4. Totals by class. Pass: raw materials, finished goods and scrap are totalled separately. Fail: one combined figure.
5. Every difference traced. Pass: each has a cause or an adjustment entry. Fail: one lump entry.
6. Book corrected by entry. Pass: an adjustment entry exists for each change. Fail: figures overwritten.

If your company is audited, agree with your auditor in advance how large a difference they will treat as material. The stock audit page covers the numbers to reconcile first, and Tally inventory management covers a stock health check.

The review step should change reorder levels for any item with an unexplained difference or a stockout. This is our recommendation, not a rule. The count tells you where the plan was wrong, and the next plan should use it.

Sort the review list into three groups: items that ran out, items with differences, and items that did not move. Raise reorder levels for the first, tighten the process for the second, and cut buying for the third.

To choose a control method for each item, see inventory management techniques. The right method differs by item, not by business.

Software can run planning, ordering, receiving, storing, issuing and the alerts that feed the review step. Arka Inventory is cloud software built natively on Salesforce, sold as a yearly subscription. Here is what we do at each step.

• Plan and order. We plan purchases from real orders, forecasts and stock, and schedule purchase requisitions or purchase orders. Purchase orders and warehouse transfers are on our Basic plan and above.
• Receive. Barcode-based receiving. Barcoding and packing slips are on our Basic plan.
• Store. We put pallets away into warehouse bins and print pallet labels. Bin tracking is on our Enterprise plan.
• Issue. We generate pick tickets that suggest the items and the bin location. Picking follows first in, first out (FIFO), and lots with expiry dates are picked earliest-expiry first. Lot, batch, expiry and serial-number tracking is on our Enterprise plan. Sales orders are on our Enterprise plan.
• Review. We send alerts for items approaching or below minimum stock, for back-ordered items arriving, and for other inventory movements. Alerts are on our Basic plan and above. We also show stock across multiple warehouses, on-order quantities and lead times.

Bills of material and production, for manufacturers, are on our Advance plan. Our warehouse management feature covers receiving, putaway and picking in detail.

Onboarding typically takes a minimum of two weeks. The time depends on how ready your item, warehouse and opening-stock data are, and on the integrations you need. We include standard setup guidance and onboarding support.

Arka Inventory publishes a Tally integration; see the Tally integration guide.

As of November 2026, the 15-day free trial has full access and needs no credit card.

As of November 2026, Basic costs $199 a month and Advance $499 a month, both billed yearly, with Enterprise priced on request; see Arka Inventory pricing.

As of October 2026, Arka Inventory is rated 4.8 out of 5 from 46 reviews on Salesforce AppExchange.