If you are using inventory management software to track inventory year-round, the only way you can determine what you really have is through an actual count. A physical count guarantees that the information you have in the system is correct. For instance, shrinkage should be detected whenever there is an inventory reduction related to items being stolen, damaged, or miscounted, so these issues can be addressed immediately.
It’s recommended that you perform a physical year-end inventory during a time when you are closed, or to find some free time to close in order to complete this task. To ensure that every item is counted, you’ll need to train and educate your staff about their responsibilities so they will understand what is expected of them.
If the end of the year is typically a slow time for your business, then you may want to conduct a business inventory during that time. If the holidays are a busy time of the year for your business, you should estimate how much you expect to lose due to inventory shrinkage and wait until after the holidays have passed to do an inventory on what you still have.
There are many benefits to performing a physical year-end inventory, including:
Taxes
You will need to conduct a yearly physical inventory count for tax purposes. Your losses can also be recorded to lessen the burden on your taxes.
Controlling Shrinkage
You can identify shrinkage issues by conducting physical inventory counts. Your inventory may be missing some units for a variety of different reasons. Among those include theft, loss, and damage.
Informed Decisions
You will be able to make more informed decisions with your vendors and wholesalers with up-to-date, accurate information about your inventory.
Effectiveness
Efficient inventory control is impossible without accurate stock information. An accurate inventory can help serve your customers better while saving your staff time. Employees can trust the inventory data instead of checking the stock room to see if they have a particular product, which allows them to focus more on serving the client.
Warehouse Storage System Assessment
The best time to assess your warehouse storage system is during an inventory count. With product overflow, you may discover that you have outgrown your current system, while you may be losing space in other areas because you don’t have the right kind of storage system.
How Often Physical Inventory Counts Should Be Performed?
Physical inventories depend on the kind of inventory involved as well as what is best for your business.
Periodic/Seasonal Inventory Count
You can get useful information about your stock that will come in handy throughout the year when you perform a seasonal inventory count, especially when it comes to seasonal items that have a short shelf life. Retailers should conduct periodic inventory counts to allow for spoilage if they sell perishable items, while retailers that sell clothing may want to perform inventory counts at the end of every season.
Annual Inventory Count
Each year, a physical inventory count needs to be conducted for tax purposes. Annual inventory counts don’t require as much effort, and you can reduce your tax burden if there are any losses recorded in your inventory.
Perpetual Inventory Counts
Technological advancements make it possible for business owners to maintain accurate inventory data. You can make real-time updates to your stock levels whenever a unit is sold with inventory management software. Perpetual inventory counts use the most up-to-date information to help you make informed business decisions.
While you should still perform a physical inventory count once each year, it doesn’t hurt to perform several frequent checks throughout the year. Periodic inventory counts ensure that your inventory matches the information in your records, and you will also be able to identify and resolve any issues with your recordkeeping. Physical inventory counts are a pain and quite time-consuming, but they are essential to a retailer’s success.
