How to Avoid Costly Year End Physical Inventory

Cycle Count Inventory

First check with your auditor to see if they will accept cycle counting inventory.

Then, sort your inventory into three classes:

• A- Expensive (or critical) inventory
• B- Less Expensive (less critical) inventory
• C- Inexpensive (non-critical) inventory

Count your A items on an on-going basis 4 times a month.

Count your B items once a month.

Count you C items once a year.

You can weave this activity into your usually warehouse operations during slower times of the day, month and year.  This allows you to achieve inventory accuracy at a far lower cost than what a year end physical inventory.  It also will be less stress on you and your operation, with less over-time and time-pressure.

If your auditor’s sample count agrees with your book inventory, then your book inventory can be accepted.  The benefits to this approach:

• Less stress
• Reduced labor
• Reduced handling
• No need for a physical year-end inventory count
• You will have a tight control over your critical and expensive inventory items

Many warehouse managers will use will use  bar code scanners for their inventory management.