When is a Physical Inventory Usually Taken?
If you manage a business, it’s important to know when is a physical inventory usually taken so you can plan ahead. A physical inventory count is typically done once a year, but the specific time may vary depending on your industry and type of business. I remember my first experience with taking inventory as a young retail manager. It was nerve-wracking! I had no idea what I was doing and felt like I was going to mess everything up.
Now that I’ve been managing businesses for a while, I wanted to share some tips on when is a physical inventory usually taken so you can be prepared if you’re ever in charge of one yourself.
What is Physical Inventory?
Physical inventory is the total amount of sellable goods that you have on hand. This figure is arrived at by counting the number of items in stock, and then multiplying that number by the unit weight, measurement, or volume. This needs to be recorded and reported at the end of the accounting year.
Managing your inventory on the item level is incredibly important. This is the only way to ensure that your actual stock matches your recorded data.
Accurately tracking your inventory is key to ensuring you have enough products on hand to meet customer demand. Implementing systems to track real-time levels of stock, as well as automate the shipping and receiving process, can help ensure accurate counts.
“If it’s not measurable, it can’t be improved.”
This quote by Peter F. Drucker, the famous management consultant, is as true today as it was when he wrote it.
If you want to maintain an efficient supply chain and meet customer demand, you need to regularly update, track and account for your inventory.
Yes, doing physical inventory can be time-consuming and mundane. However, by implementing processes and systems to get a clear picture of stock availability, you can accurately track a high volume of inventory in less time.
This article will discuss why it’s important to account for your stock, how to do so, and the benefits of outsourcing your fulfillment.
When is a Physical Inventory Usually Taken?
To decide between counting your inventory continually or only periodically, you must decide between perpetual and periodic processes.
The main advantage of a periodic inventory system is that it requires less work to maintain than a perpetual system.
On the other hand, a perpetual inventory system provides more accurate records of what is in stock at any given time.
You should also consider the size of your business and how often you receive shipments when deciding how often to count physical inventory.
If you have a large inventory and receive shipments frequently, you will need to count more often than if you have a small inventory that is not replenished as often.
This inventory management method is automated through POS systems and is best suited to businesses that deal with large amounts of products. This method is beneficial because it gives real-time updates on product quantities, which can help prevent overselling and undersupply.
When it comes to counting physical inventory, the best time to do so is when it best suits you and your team. However, for the most accurate results, it’s always best to consult an accountant.
How to Plan for a Physical Inventory Count
To successfully carry out a physical inventory, staff need to plan and prepare adequately, and managers need to be involved in every step to provide advice and support.
If you want to do a physical inventory, you should start planning at least three months in advance.
The night before or morning of the count, set up any equipment and materials needed for counting at each station. Once everything is in place, start the inventory count!
A physical inventory of a large company or warehouse can take up to three days.
Physical count planning begins 12 weeks in advance to allow staff plenty of time to prepare.
What is the Physical Inventory Counting Process?
To carry out the physical inventory process, you’ll need to assign a supervisor to each team of counters and provide them with all the necessary equipment. The supervisor will be responsible for ensuring that the counters have everything they need to do their job properly.
On the date of the inventory, all frozen items are to be left as they are. Managers should also have a list of items that need checking.
The next step is to physically take an inventory count of the items.
- Assign maps, inventory to-be-counted printouts, and equipment to staff members.
- Staff will count the inventory that has been assigned to them.
- Staff will fill out spreadsheets or count tags.
- Staff returns spreadsheets or count tags to managers. If staff is using count tags, they affix the top portion of the tag to the stock.
- Managers enter the data into the inventory system.
- Managers compare counting data to data in the system.
- Managers compare data against yield and pack reports.
- Managers assign staff to investigate any discrepancies.
- Staff recount or justify the discrepancies.
- Staff resubmits any data changes to managers.
- Once managers validate the count data, they send it to the accounting department.
- Accounting audits the inventory count data.
- Accounting approves the inventory count.
- Managers unfreeze the stock and return to normal operations
Flowchart of Physical Inventory Count Process
Draw a simple map showing your warehouse. Each storage space should be labeled. Next, use a blown-up section from your map to show how each space will benefit the count team.
Assign specific employees to certain areas.
Warehouse Layout Map for Inventory Day
When counting inventory, employees should verify the location of each asset, its detailed description, its exact number, how many are present, and which measurement system is being used. If there are any labels on assets, they should verify that these match the information.
Once you’ve completed counting a section, you should immediately follow up on that section. You should also randomly check sections throughout the audit.
Thank your staff for their help in conducting the inventory. It may not be the most exciting task, but it’s essential nonetheless.
After the inventory count is complete, it’s time for the analysis. If your study shows any stock irregularities, start an investigation.
Areas in your warehouse that have a higher likelihood of having an inventory anomaly should be pinpointed and reported.
Post Inventory Count: How to Keep Your Inventory Under Control
You have an inventory management system that is simple, quick, and easy to use. It provides you with an accurate count of your inventory in your point of sale systems.
What are your plans moving forward?
One of the most important things you can do to manage your inventory is to keep track of your data. This data can be transformed into useful information that can help you make decisions about your inventory.
The discrepancy report provides you with a list of any items that you are missing.
The inventory management system provides many reports that help you manage your store.
The restocking order helps you determine when you need to place an order for more of each item.
The replenishment plan helps you know what to order and when.
The sales history shows you what has sold the most.
Use the discrepancy report to easily spot any discrepancies in your on-hand quantities after a count. This will help you keep an accurate inventory.
The on-hand stock status report is a quick and easy way to see what you have in stock after a count.
You can watch your on-hand quantities on a daily or weekly basis to see what your stock is like for each location or category.
This report will help you become familiar with your numbers and will give you peace of mind. The report shows the inventory levels for each item in your store. If any of your items are below the reorder point, you’ll know that you need to order more soon.
What is most important at the end of the day is to order what you need promptly.
If you want to make sure you never run out of an item, set up a reorder point for it and keep an eye on your below reorder point report.
Swift Count can help you print reports of what needs to be reordered, order the necessary items, and have them appear in your inventory system.
There is no need to worry about managing your inventory levels; this can be done automatically using a POS system, accounting package, or online store.
Conclusion
If you’re in charge of a business, it’s important to know when is a physical inventory usually taken so you can be prepared. A physical inventory count is typically done once a year, but the specific time may vary depending on your industry and type of business. By being aware of this timeline, you can ensure that your inventory count goes smoothly and efficiently.
