Why Taking Physical Inventory is Important and When To Do It

Keeping your stock ledger up to date and accurate is an important element to the success of your business. Without accurate information, your business runs the risk of lost sales due to products being out of stock when your customers want them. The most effective way to maintain this unit system accuracy is to complete a physical count of your merchandise. Inventory counts can be done once a year or periodically throughout the year. Either way, January normally brings low stock levels and reduced foot traffic, making it the perfect time to complete an inventory count.

Listed below are a few suggestions on how to complete a successful physical inventory count:

• Schedule the event in advance and create a plan. To minimize impact to your normal business operations, it is a good idea to pick a day that your business is open for reduced hours, like a Sunday. This way, you can start the inventory either before you open or after you close and still complete the process by a reasonable time of day. Have a predetermined workflow for the count, so you can inventory more difficult areas early in the day while your team is still fresh and alert. Create a store map showing all fixtures and stockrooms that need to be counted. Use this map to document your workflow and track the completion of the count. Ensure all utilities, like electrical, heating, Wi-Fi, and lighting, will be available at the time of the scheduled count. If you complete your inventory count outside normal business hours, utilities that are on automated timers may otherwise be unavailable. 

• Prepare the sales floor and stockroom. Organize your sales floor and stockrooms, making sure all like items are stocked together. Review items to ensure each one has a sales tag attached, so they can be accurately counted. Label all unopened shipping boxes with merchandise information and quantities. Merchandise that needs to be counted should be separated from items that have no value and do not need to be counted. Review any damaged or out-of-package merchandise to make sure it has been properly accounted for. Bring all merchandise in your stockrooms down to lower shelves to allow for easier counting. The easier things are to count, the more accurate your count will be.  

• Educate staff on the process and explain your expectations. Select your best staff for this project. Choose people who pay attention to detail and know your products well. Hold a prep meeting with your team and set expectations. Share with them the importance of this process and how it impacts your business. Create accuracy thresholds and assign a point person to make any final decisions as needed. This process normally takes a while, so have scheduled breaks and provide treats or other food for your team to keep them motivated. 

• Verify counts and review findings. Make sure to recount all high-priced items to ensure accuracy. It is also a good idea to review high-theft items to verify your new counts are as accurate as possible. Be aware of all items that are in shipping limbo. Determine if they are currently in your book inventory and need to be added to the count. Once complete, revisit any large discrepancies and verify the accuracy of those results. After all counts have been verified, look to pinpoint any high-shrink opportunities. This loss information is helpful in targeting exactly what items are the source of your shrink, and it allows you to create a specific plan to address accordingly.  

The physical inventory process is essential to maintaining your inventory accuracy. Utilizing the above tips will help reduce the impact to your customers and support the completion of an accurate count. Remember, you can’t sell your merchandise if you don’t have it in stock!