7 Golden Rules of an Inventory Count
These are our general rules for inventory counting, although most are to do with a physical count, a lot of these rules still apply here when using a digital method such as the inventory counting software that Digitally provides.
An accurate inventory count helps you make the correct decisions about managing your business.
It allows you to reconcile physical stock to the stock levels, identify variances, and discover issues with stock management and control.
With accurate knowledge about stock movements and stock on hand, you can make informed decisions about theft/shrinkage, slow-moving items, damaged stock, technological discrepancies and warehouse processes.
Here are our top tips to have a smooth, successful and stress-free inventory count!
1. Why do you need an inventory count/stocktake?
For the generation of gross profit margins, updating your POS (point of sale) system with stock levels, identifying shrinkage, year end accounting purposes, are a few of the main reasons. Know why you require it and have this at the core of your plan for counting your inventory.
2. Whats to be counted, by whom and when?
Your inventory can be in several different areas and not all neatly stored together in one location. Have all locations listed and determined if they all need to be counted at the same time. For example, if there is a storage area for seasonal stock, then can this be pre-counted? Does it have to be done at the time of the main count? The more areas that can be pre-counted in advance will make a significant reduction in time on the day of your inventory audit.
Do you have your staff rota completed for the inventory audit? Have all key personnel available on the day so as they can be responsible for the counting in their own areas.
3. Straighten, Sort, Shine
The more preparation that goes into the preparation of your inventory management, then the easier the counting process will be. Straighten the items on the shelf, sort like-with-like products and clean the areas to be counted. Remove excessive cardboard boxes, have all full cases on the bottom and the open one on the top, pre-count large cases of smaller items and have the quantity written on the outside of the box.
4. Tools for the inventory count
Know what equipment you need;
- Hand held scanners – For bar-coded inventory. Do you own them? Have to rent them? Are they all working? Do they have the latest version of software?
- Equipment – Ladders lifts, small steps for slightly out of reach areas, gloves for counting fridges or freezers, paper and a printer for printing count sheets. Access to the barcode printer
- Trained Stocktakers – Untrained stocktakers may not fully understand the process.
- Supervisors – To spot check certain areas to ensure maximum accuracy.
5. Inform your team
Part of your plan requires people that can count accurately. Tell them the importance of the count, what they will be counting, potential problems, when break time are likely to take place etc. Keep them in the communications loop and have a plan as to how things will go.
Distractions can easily lead to errors. Errors lead to inaccurate reports, thus undermining the whole effort of the inventory audit. Discourage radios, mobile phones, earphones and idle chit chat while the count is in progress
6. Undertake rechecks
Vitally important. We are all human and we all make mistakes. Have a rechecking procedure in place so as rechecks are undertaken while the inventory audit is in progress. Do not leave staff to it by themselves as mistakes are likely to result in costly and time consuming problems down the road which little chance of recourse. This accountability recheck will make a huge difference to the accuracy of the inventory count.
7. Compare results
Going back to the original point of knowing why you wanted a count of all inventory in the first place, is now ensuring that you have fulfilled this need.
- Counted accurately and do you have confidence in the count?
- Accurately identify shrinkage?
- Updated your POS?
If the reasons that you are not able to answer the above correctly is more than likely because one or more of the above steps have not been thoroughly dealt with. Go back over them and ensure that future problems do not reoccur the next time.