From complete accounting records to stock levels you can trust, accurate inventory records are vital to the success and profitability of your company. The accuracy of your inventory data directly impacts stock levels, customer service, employee theft deterrence, and more. In order to maintain accuracy, many companies perform a yearly inventory audit. Dreaded by most, annual physical inventory counts tend to conjure up memories of long hours spent in excruciatingly hot or unbearably cold warehouses trying to count every-single-last item in stock. Fortunately, much of the pain within this process can be avoided by simply planning ahead!
With accuracy being the goal, the annual count will only be successful if done right. The following 6 pre-planning tips will help you ensure a smooth process and a precise end result.
1. Choose a Date. There are several factors to consider when selecting the date for your year-end count.
a) The best time to perform a physical inventory is when you are closed for business as it will make your count more accurate. If this isn’t possible, choose a day and/or time of day when business tends to be slow, and inventory stock levels are at their lowest point.
b) Avoid doing inventory on days when employees may be distracted – this includes right before or after a big holiday.
c) Save the date, and notify staff members as early as possible.
2. Select a Method
a) Bar-Code Readers. This is by far the easiest and most accurate way to perform an inventory count. While there is an initial investment required to purchase handheld barcode devices and implement the technology, many companies see an ROI in less than 18 months. Bar-code technology can assist you in reducing your physical count time and resources by 75%-80%. This means an inventory count that previously took a week behind closed doors can now can be completed in a matter of hours. This method removes the necessity of two man teams and instead enables just a single person with a handheld to count an entire section of your warehouse. In addition, it eliminates manual data entry and clerical errors because the counts can be downloaded directly from the bar-code readers into your computer. If your software system supports bar-code technology, the benefits will most likely outweigh the cost.
b) Count Cards. Either simple index cards or carbon copy sheets which denote the product and bin location, count cards should be sequentially numbered and placed on shelves or in bins right before the commencement of the physical count. This method is organized and quick (for a manual process), because counters can go location by location counting and recording inventory. The carbon copy option is ideal because once the inventory count is complete you can leave one copy with the merchandise and forward the other to your accounting department. If you choose to use count cards you may find it helpful to provide counters with supplemental colored cards that can be used to record misplaced merchandise which can later be easily located and moved to its proper location.
c) Count Sheets. This is the cheapest method for performing an inventory count, but it is also the least accurate and most time consuming. Count sheets are pre-printed lists of inventory pulled from your company’s computer system. Generally those that use this method designate two man teams (with at least one experienced employee per team) and assign them different sections of the warehouse. The more experienced team member should do the counting while the novice should be in charge of recording. The staff members then find, count and compare merchandise on hand against the numbers recorded on the list.
3. Go Shopping. Depending on the method you choose, you’ll want to make sure that you have all of the appropriate supplies necessary to complete your year-end inventory count on hand. This may include sharpies, pencils with erasers, white/colored index cards, working bar code readers, clipboards and more.
4. Communicate with Staff Members. It is crucial that you meet with staff members ahead of time to explain your chosen method and inventory counting process. If you are concerned about internal fraud you may consider scheduling counters in different areas of than where they typically work. This will help to thwart any ‘theft cover up’s’ that might keep your inventory counts inaccurate.
5. Organize Before Counting. This is perhaps one of the most important parts of the pre-planning process. As close to the selected physical count date as possible, have your staff go through your warehouse and put everything in its proper place. Further, you should have a designated location where damaged and/or obsolete items found during the clean-up process can be placed – that can be dealt with appropriately by management.
6. Backup, Backup, Backup! Just to be safe, it is always a good idea to create a backup of your database before you begin the inventory count, again before you apply the physical inventory count changes, and a third time after the changes have been implemented.
We hope these six tips will help you better plan and prepare for your year-end physical inventory count. Doing the appropriate amount of pre-planning will help you streamline this tedious process and achieve the desired end result of accurate inventory data which will ensure greater customer service levels and long-term success!
Free Webinar! Eliminating the Challenges of Your Manual Physical Count for Year End
Date: Thursday, November 3rd, 2011
Time: 11-12 PM Eastern
The once a year “Physical Count” is quickly approaching and it is not too late to implement an automated system to streamline this process. Though an important task, completing an inventory count can often be unnecessarily time consuming, leading to feelings of dread by employees and managers alike. However, with the appropriate preparation, this year’s physical inventory process can be dramatically improved giving your company the accurate balance information you rely on to remain competitive.
The webinar: Eliminating the Challenges of Manual Physical Count for Year End will help you:
- Be more informed about the common errors and inefficiencies found within a manual physical count process
- Determine the ROI on physical count automation for your organization
- Learn how to measure hard and soft benefits of automation
- Know what to look for in an automated solution
- Find out when it makes sense to implement