What should I ask about a lumber yard’s inventory counting and shrinkage?

Start with the count itself. Is it a full physical count, a rotating sample or an estimate from the system? Who does it, and is anyone independent present? Ask to see the last count sheets and the adjustments that followed. Pay attention to how large the gap between system and shelf was, and what reasons were written down.

Lumber has particular losses: wet or warped stock, cut-offs that never get sold, mis-shipped orders, theft from the yard and bundles that arrive short. Ask how each is recorded. Is damaged stock written off promptly, or does it sit in the inventory at full value? Walk the yard and look for old, weathered packs that look forgotten.

Ask how the figure is valued and who decides. A sale usually includes stock at closing, so the count on that day matters. Agree a method and who will attend. Your accountant should review valuation, and your lawyer should write the process into the agreement. Ask about security, cameras, yard access and delivery controls, since they affect what leaks out. Finally, ask how the yard separates stock it owns from material held for customers or on order. Mixing the two can inflate the count, and a clear line makes the closing figure much easier to agree.

Key takeaways

• Ask for the last full count sheets and the adjustments made.
• Look in the yard for aged or damaged stock still carried at full value.
• Agree the closing count method in writing.