It’s time to embark on the annual ritual of conducting a physical inventory count for your store or retail business. A physical inventory count is the process of manually counting all retail products in person and comparing them to the records in the point-of-sale (POS) system. This typically involves a team of retail staff members systematically going through the sales floor and stockroom, counting each item to ensure accurate inventory records.
For many retailers, the prospect of a physical inventory count can evoke anxiety and apprehension. Yet, despite its perceived tedium, this process remains a vital component of annual operations. Ensuring alignment between recorded inventory and physical stock levels allows for more precise inventory management, early detection of potential losses or shrinkage, and confidence in meeting customer demand.
The National Retail Federation Security Survey recently found, the average shrink rate taken as a percentage of total retail sales represents $112.1 billion in losses. – National Retail Security Survey
While the task may seem daunting, it doesn’t have to be an ordeal. With simple planning and tips from RCS, you can streamline the inventory count process, making it more manageable and even less dreaded.
Step 1: Preparation
Thorough preparation is critical to success before embarking on a physical inventory count. Here are some essential steps to consider:
Organizing Items: Ensure that all items are well-organized and easily accessible for counting. Verify that barcodes are readable and labels match item descriptions.
Store Mapping: Divide your store or warehouse into manageable sections, estimating the time required for counting each area.
Scanners: Consider using a handheld scanning system like MIMS or an AML data collector device.
Handling Deliveries: Decide how to handle items received close to inventory day, whether to separate them or integrate them with existing inventory.
Managing Odd Items: Address singular or held items by either processing them for sale or returning them to inventory, ensuring they are accounted for properly.
Back Stock Precount: Consider pre-counting back stock to reduce time on inventory day, focusing on items that are moved less frequently.
Marking Counted Items: Develop a system to mark items as counted to prevent double-counting and ensure accuracy.
Step 2: Data Cleanup
Cleaning up data before starting the physical count process can help minimize discrepancies. Here’s what you need to do:
Complete Transactions: Ensure that all transactions, such as receiving, returns to vendors (RTVs), and transfers, are completed before the inventory count begins to avoid interference with counts.
Removing Uncounted Items: Review and remove unfinished counts from previous sessions to prevent overwriting and ensure accurate counts.
Step 3: Counting Process
Now that you’re prepared and your data is clean, it’s time to start the physical counting process. Here’s how to proceed:
Creating Physical Count: Use your inventory management system to create a physical count, setting filters and preferences for inventory selection.
Verifying Counts: Review counts using edit lists to identify discrepancies and areas needing recounts.
Making Adjustments: Enter recounted values manually or import updated counts to reflect accurate inventory levels.
Step 4: Finalizing and Reporting
With the counting process completed, it’s time to finalize your counts and generate reports. Here’s what to do:
Final Variance Report: Generate a final variance report to review discrepancies and ensure accuracy before posting.
Posting Counts: Post counts and adjust uncounted items to zero quantity, ensuring consistency and accuracy in inventory records.
Cycle Counts: Consider implementing cycle counts based on factors like item value or frequency of movement to complement annual counts and maintain inventory accuracy.
Customizing Menus: Customize menus in your inventory management system to streamline access to inventory-related functions and improve efficiency in future counts.
Step 5: Troubleshooting Discrepancies
If discrepancies arise between before and after inventory valuations, it’s important to troubleshoot and address them promptly. Here’s what to do:
Recalculate Item Quantities: If discrepancies occur, recalculate item quantities to identify and correct any errors.
Monitoring Average Cost: Monitor average cost changes to ensure that discrepancies are not caused by cost fluctuations.
Revamp your inventory management process with ease and efficiency! We understand that conducting a physical inventory count may not be the most thrilling task on your to-do list. Still, we also recognize the critical importance of accurate inventory records for your business’s success.
Ready to optimize your inventory management system? Watch how to complete a Physical Inventory and Cycle Count in NCR Counterpoint and get counting!
