Inventory counts: its methods and main benefits

8 min read

Physical inventory counts are usually tedious and time-consuming tasks for employees. It usually requires business operations to stop because no inventory movement should happen in warehouses or stores. Thus, both business owners and employees are not always fond of conducting physical inventory counts. 


However, whether you enjoy it or not, an inventory count is a crucial control tool for retailers and wholesalers. Comparing the track between inventory volumes in accounting recordings and warehouse employees can ensure accuracy, notice potential shrinkages, and ensure that inventory movements are correctly recorded.


What is an inventory count?


An inventory count is a process when employees physically count retail products. A staff member, who usually is an independent party and has no interest in inventory-related activities (e.g., warehouse controls, warehouse assistance, accounting, etc.), goes through sales locations and records inventory by hand or electronically with a device.


The overall purpose of physical inventory count is to conduct internal audit procedures and ensure that  accounting recordings actually exists in storage. 


Importance of inventory counts


Physical inventory counts benefit retailers in many ways. First, it helps to understand on-hand stock levels while comparing them with the data from inventory management or account systems. 


Sometimes, discrepancies occur between the recorded data and actual inventory because of potential human error or theft. If you do not continually track and control these discrepancies, it can eventually create material expenses for your business. 


This is especially a serious issue for eCommerce businesses. Online companies need to have absolutely accurate synchronization of available products and eStore data. Especially for eCommerce businesses selling on multi-channel platforms and not having an integrated inventory control system, the chances of losing track of actual inventory volumes are higher. Imagine the nightmare of accepting sales on out-of-stock goods.


You can synchronize the inventory data from multiple platforms with the integration of eSwap modern inventory management software.


If the actual physical inventory levels become lower than those presented in the inventory management system, the business may experience under stockings and lose sales. The other scenario is also possible. If the business holds more inventory in storage than recorded, it might reorder again, and experience increased holding costs and other losses caused by overstocking.  


Inventory counts are an easy and effective solution for eliminating inventory discrepancies and losses associated with them. They profit margins by reducing costs and expenses. 


Inventory count

Inventory counting tips


Now, let’s discuss some tips that would increase the efficiency of inventory count procedures.


Consider cycle counting

Cycle count refers to partially counting the inventory without pausing store or warehouse working processes. The cycle counts are conducted daily or weekly. And eventually, the whole stock is getting counted over a specific period. 

If performed effectively, the cycle counts can eliminate the need for whole inventory counts. 

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Read more on cycle counts here.


Integrate technology such as barcode scanners


Of course, it is possible to count inventory using pen and paper manually. An employee can take a stock count sheet and manually record the data, then compare it with the recordings of inventory management software systems. While it is possible to get the job effectively performed, its efficiency is under doubt. Physical counts are already tedious manual tasks. So, businesses can increase accuracy and speed by integrating technological solutions. It can, for example, be using barcode scanners. With scanners, data recording and sync is faster.


Ensure the independence of counting employee


Not every employee should be considered for inventory counts. To avoid subjectiveness and ensure an honest approach, the counter should have no connection or interest in the results of a count. 

Another approach can be cooperating with independent, third-party counters. They can be more experienced, have the required resources and fresh eyes. 


Prepare schedules beforehand


Inventory counts can require a lot of time, especially if you decide to count the whole inventory. So, it is crucial to plan everything. 


It would be best if you chose the timing. Some stores choose to take full stock counts once a year. It usually happens at the year-end with the closing of the financial year. When a large count is being planned, it should also be considered that the business processes and any inventory movement will be on pause, including warehouses and stores. 


If you are going to take cycle counts, you should plan the timing so as not to interrupt the ongoing duties and tasks of employees involved in counts. Also, consider that it is a manual task, which does not require any thinking, yet tires the counter. So, it might be beneficial to schedule cycle counts at the end of a working day. 


Address discrepancies 


Conducting inventory counts and identifying discrepancies is not an end itself. The important thing is not to find mistakes and issues but to address and solve them. Of course, the first thing to do is to adjust the data in the system. After that, investigate the roots of the issues. Discrepancies can arise as a result of human error, theft, etc. To solve these issues, you might need to update procedures and increase controls. Also, you can decrease human error by automating different processes. 


You can start by integrating inventory management software. Learn more about the benefits of inventory management software here


To sum up, retail and wholesale businesses relya lot on the accuracy of inventory management. Thus, ongoing control procedures, including physical stock counts, are essential.