Taking at least one physical inventory count during the year is a crucial part of your internal control procedures. Keeping a close eye on the products you have on paper vs. what’s actually in-store helps you to maintain inventory accuracy, identify causes of shrinkage, and ensures that you have the right amount of stock on hand to meet customer demands.
But the thought of counting inventory and reconciling your records can seem overwhelming. That’s why we’ve put together a list of tips to help you prepare for and conduct a successful physical count of your stock:
Prepare Ahead of Time – According to Effective Inventory Management, you should start planning your physical inventory count no later than 12 weeks before the count date. Here are 3 things that will help you plan a successful count:
1) Decide on a count Date – “While you can do an inventory of your store anytime, says The Retail Doctor traditionally it is the last weekend of January or at the end of July when your skus are potentially lowest.”
Schedule your inventory count after business hours, if possible, so you don’t disrupt business. It that won’t work, you’ll need to close your store for a day or at least a block of several hours. Additionally, you should post a sign outside your store, or at the checkout counter, detailing your upcoming inventory plans.
2) Prepare the stock area – Clean and organize your stock area to make sure that every item is in its appointed location. Starting out with all of your products in the proper place will make your count go much faster and ensure more accurate quantities.
Use an oversized piece of paper to create a map of your store, being sure to sketch out the location of every rack, display, wall, and shelf, including the back room or storage area. Starting at the front of the store, walk counter-clockwise, suggests The Retail Doctor, assigning each rack, display, and shelf a number or category to represent different counting sections. Then number or name your tracking sheets to correspond to the sections on your map.
Consider counting slow-moving products and surplus areas before your scheduled count and make sure you mark the bins and shelves that you pre-counted. Also, make sure you have the necessary supplies (including cards or counting sheets, clipboards, pencils, etc.) so everything is ready to go for the big day.
3) Build your counting team – Typically your staff will be doing the counting, but if, for some reason, you need more helpers, you can recruit reliable friends and family members, as well as responsible high school students (they always appreciate a little extra cash). Make a list of your helpers, including their names, cell phone numbers and email addresses so you can inform them of any necessary details. Have the prospective helpers call or email you at least a week before the count to confirm that they’ll be there.
How to Execute Your Physical Inventory Count
Make sure helpers arrive at least ten minutes early on the day of the count. As they arrive, check off their names and feed them a hearty snack so they’ll have the energy to perform the task ahead of them (this is also a good incentive to get them to sign on for the job, as well as a good way to thank them for their help).
Break up Counters into Small Groups – If you use cards or sheets, pair two helpers together for accuracy. Be sure you put an experienced employee with someone who has less knowledge of your products. Instruct the experienced person do the counting, while the inexperienced person records. Assign each group to a particular area as designated on the map you prepared.
Count, Compare & Record – Before you let your helpers loose, explain what they’ll be doing and walk them through the actual counting process. Present your teams with count sheets or cards listing the items, skus, descriptions, areas or bins they’ll be counting and give them ample time to complete their counts (if they feel rushed, their accuracy will be affected). It’s recommended that you count best selling and fast moving products first.
As cards or sheets are finished, have a supervisor mark off the map and inventory sheet with a red check and verify the counts. After the counts are all verified, compare them to what’s on your books, address discrepancies and do recounts as necessary, then make the necessary adjustments to your records.
It’s a good idea to review your counting process and take notes on your procedures. Afterwards, meet with employees who participated in the count to discuss what worked and what didn’t. This will give you a good idea of how to improve future inventory counts.
Just because you have inventory management software doesn’t necessarily mean you know exactly what’s on your shelves. And if you don’t have accurate inventory totals, you’ll have a harder time trying to replenish stock, prevent shrinkage, keep customers happy, and increase revenue.
That’s why it’s so important that you do physical inventory counts. Keep in mind, though, that for your physical inventory counts to be successful, it will require planning. When properly executed, your counts will provide complete and accurate inventory records that will aid you in better managing your operations and making informed business decisions.