12 practical tips to make ‘Taking physical inventory count’ easy

We all know that as retailers, counting the physical inventory is not something that we like to do. It is one of the most tedious tasks, as counting your stock may take hours and a lot of energy! 

Checking the quantity of the inventory you have on paper versus what actually is present in your warehouse helps to maintain inventory accuracy, Therefore to make this task easier we have jotted down 15 inventory counting best practices. These are practical tips to count inventory and will surely make your task less tedious and tiring. 

Let us first understand the basic concept of physical inventory.

What is a physical inventory?

Physical inventory is a process in which a business physically counts its inventory. It refers to the inventory which is physically present in the warehouse. It may be mandated by financial accounting rules or the tax regulations that mandate you to report an accurate value of the inventory. In other words, it is the activity of determining the inventory quantity into an exact figure. In case of any differences in the quantity between physically present and the mentioned quantity in the inventory system, counting the physical inventory really helps. So once you are done with physical inventory, your system, and physical stock levels should be the same.

What is the purpose of the physical inventory count?

This activity is not a very interesting job but performing physical inventory count is very important. It helps you spot the difference in the quantity of inventory you have written on the papers to what is actually present in your warehouse. This activity also accounts for discrepancies, like lost or stolen inventory. It gives an account of the inventory that needs to be purchased. It also helps us find out the inventory that is undersold or oversold.

Factors that affect physical inventory:

  1. Merchandise which is out for repair
  2. Merchandise stored in what inventory counters assume is an empty box
  3. Merchandise on display
  4. Old merchandise 
  5. Processing the paperwork to return layaway to Stock, but leaving the merchandise in Layaway room.
  6. On hold merchandise
  7. In cases 
  8. Of interest or transfers not being properly accounted
  9. A check on the merchandise store in the seldom-used storage area
  10. Merchandise was taken out for advertising and marketing purposes

These were some of the factors that can affect the count of physical inventory.

When should physical inventory be counted?

The answer to this question is subjective. It completely depends on the company and its products. Yet there is some classification made on the basis of the time span between two counts.

 Annual and seasonal

There are many companies that perform inventory counting once a year right before the sale season. Such companies do not have many products to track. And in many cases, they also do not have the required staff quantity to carry out this activity more frequently. Many companies also do not perform this activity because they believe it takes a lot of time and effort. 

In preparation for physical inventory counting, your warehouse should be completely prepped and clean. During the counting, most of your problems must be detected and also solved at the same time. You might have to ask your workers to put in extra hours. It can become tedious and tiring but the only motivation that you can have is that this activity is just for a few days. Due to the long-time span between physical count, the company may open up a lot of unfortunate surprises. You can face situations in which your product is lost, stolen or spoilt. One must think of this situation before choosing the annual counting technique.

Periodic

This is again very subjective. It may be done once a quarter or once every two months or once every 3 weeks. It completely depends upon the size of the warehouse and the requirements of the company. Periodic counting gives better visibility than the annual process. It definitely requires more time and huge manpower. New employees who join during the counting period must be trained to track the inventory. The periodic counting process gives a clear idea about your inventory and leads to less confusion. 

The Cycle Method 

This is a continuous process. The cycle method is the way in which warehouse workers continuously and consistently count some parts of a company’s inventory. It refers to the segmentation of a warehouse and the physical inventory on a daily basis. It is preferred as the best option for large companies that need consistent reports. A company needs to have a certain number of employees who are specialized in this field. This could mean a lot of labor time and energy which is required while counting. When the company uses the right equipment and software, the job gets less tedious.

These were the three types of physical inventory counting depending upon the time. Now let us focus on the methods/tips of physical inventory counting.

Tips for managing physical inventory counting

Use the right kind of equipment

You can use scanners or other types of stock counting technologies for better results and less effort. Traditionally, this activity was performed with a paper and pen. The staff was instructed to use sheets to note down the total of the products and reconcile the data in their system. In other words, this method was highly inefficient and required a double entry. We all know that physical inventory counting is a manual task, but the last thing that you would want is to do the tally manually too. 

To avoid double efforts, you can digitize the counting process with a scanner, a mobile app that makes counting inventory as easy as ABC. Through this app, you can perform inventory count using your iPhone, iPad or iPod touch. All you need to do is scan your product barcodes and the app will automatically save the record. Can you also think completed counts? So once you’re done the counting, you can easily update your stock levels. 

In case you need to improve inventory counting with automation, you can incorporate RFID technology. This lets you embed chips into the packing of your merchandise. This helps you target their location easily. RFID is really handy, especially when it comes to larger firms. It helps you to maintain complete accuracy.

Choose your “counters” wisely

It is very important to choose the right people to count your inventory. You should not choose them randomly. They should be a group that has knowledge regarding the same. The group should consist of season employees as well as those who can provide a fresh outlook. The reason you need this mix is older employees would be more familiar with your policies, location and would have a better experience. However, fresh eyes are also beneficial during the physical counting for their exuberance. 

In case if you want to opt for something else, you can hire a third party inventory counters. This can be helpful if you don’t have in-house employees. This is also helpful in cases when you’re in house employees are busy with other work and you don’t have a specific theme for inventory count. In such cases, it is best to consult a third party store counters and follow their process.

Consider cycle counting

 If you are tired of doing the tedious job which takes a lot of energy and time, cycle accounting is a good method is to divide your work on a daily basis. It refers to a process of partially counting inventory on a continuous basis. This helps you to verify stock levels without interrupting store work. It is known to be one of the most efficient ways of continuity. 

One simple routine for cycle count is to do it on a weekly basis usually before the store opens. By doing this the store can manage tighter inventory control and at the same time also maintain an uninterrupted functioning store. For each cycle, you can select a small section of the store for counting. It is also feasible for small business owners. This process helps you to catch problems sooner and before they turn into huge unaffordable mistakes

Physical inventory count should be planned ahead of time

Whether it is matching the inventory, checking what is the differences, or having a full physical inventory accounting, time plays a very important role. So it is important to have a think about when to schedule your counting and then plan. It just completely depends on you. You can conduct an annual, bi-annual or weekly counts as well. Some say it is best to do it on the last weekend of January or the end of July.

Whichever way you decide, you should always plan ahead. At this stage, when you are planning a count, you should take down the name of the people who will be helping you with. Make sure that they are available on the decided day. Initially, you would not want to halt the operations because it might affect your business hours! But if by the unfortunate situation, you’re counting operations are stopped, then you should close your shop for a day or two. 

Map your store

It’s important to know where inventory is actually located. Map out your store, make a sketch of the parts, racks, display wall, and the shelf as necessary. The idea is to make a detailed layout of your store and make it easier for the location where inventory is available. This can help you determine the particular shelves to cycle count. 

Label box and shelf

You should not jump into the pool when you don’t know how to. Exactly the same way you should not get into a blind. In case you are doing a count of inventory, you should be sure about marking the boxes on shelves in your warehouse. For inventory counting, having everything marked makes the entire job easier. While you doing this, make sure that everything is where it should be. You can take a walk around your store or warehouse just to have a check on their proper places. You need to make sure that the products are not missing labels. Only after such corrections are made, you can further proceed to count the physical inventory.

Orient your staff

Like any other resource, staff or manpower also plays a very important role in counting the physical inventory. You need to make sure that your team is familiar with all the steps that you have planned to execute. For example, if you are planning to create a map, share it with your team members. Once your map is created make sure that your team members are familiar with it.

If you plan to change certain positions of your merchandise, you should let your team members know about it. You can take your team members for a walk just so that we get comfortable and familiarise themselves with everything. This will make the task easier and will not require a lot of time. If your staff is well educated and is well versed in the entire process, you do not have to put in extra effort or stop your process for any reason. As an extra measure, you can also educate your staff members about certain unfortunate situations which are quite common in this field.

Prepare a good working condition for your staff

It is important to give your staff a good working condition. This would help the staff to work more efficiently. Staff will also get motivated and will try to put in their best if they are provided with good working conditions. You can prepare food and drinks for your staff so that they can work for late hours with good energy. Physical counting of the invention is a tedious process, so it is important to provide your staff with good working conditions. This will also make your employees happy. Keeping them well fed and treating them properly would give you better results in less time.

Think about the uncertain and unusual situations

The business also caters to many risks. Business is stressful without loss. They can be situations in which you don’t exactly know what to do. They also might arise situations in which planning your inventory counts were not exactly right. Well in the business you can experience uncertain and unusual situations too. This may also happen while counting your inventory. Such cases may include outstanding orders from suppliers of products that have been returned. Ideally, these items should be processed and dealt with before performing the count to avoid any confusion. But many times we forget about such products. Therefore which planning the counting of physical inventory, one must take into consideration the uncertain and unfortunate situations which may arise.

Leveraging your POS system

While physical inventory counting is mostly a manual process. The preparation and reconciliation of the physical count with the system of record need not be done manually. Invest in a good cloud-based POS system like Easyops, which can help schedule and plan cycle count. The POS system should also provide a mobile stock-taking system to record the physical inventory counts. Finally, the system should provide a reconciliation report of physical count vs system count and the ability to reconcile physical inventory into system inventory.

Double-check your inventory

There may be times when you think that you have the perfect count but only if you go for a second counting check, you would be able to find silly mistakes. It is important to cross-check your work so that you don’t have any confusion later. Double Checking not only gives you assurance but also reduces extra effort. It is always a good idea to doublecheck your inventory number before updating your stock levels. Doing so will also enable you to analyze the data and see what you can do to improve your business. This task should be straightforward if you’re POS has reporting capacity. You just need to download the right report and study the data for actionable insights. You can then use your inventory report to identify the right cycle zones. This will help you understand whether your business is at a loss or heights of profits.

Total up all sheets by category

If practical, you can try to tally up the results on the night you complete your inventory audit. This will give you plenty of time to check into any inconsistency. This will also help you to recall any complications with the physical count. In case of issues, you can also finish your tally the next morning.

Summary

Doing physical inventory count is very important for an organization and the overall success of a business. If you cannot confidently say how much and what quantity of merchandise you have at your warehouse, you will not able to maintain profitability. In this article, we have tried to simplify and streamline the process of stock-taking for our readers. You can be sure that you would conduct your count accurately and with less effort. If you have any comments or questions please feel free to ask us via the comments section below.

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