Cycle Counting Inventory

Depending on the size of your company and how many SKU numbers your business handles, cycle counting inventory may be a more manageable way to update your inventory counts than performing a physical inventory count.

Whether you use a perpetual inventory or period inventory system to update inventory counts, to reconcile your books you must review your inventory from time to time to make sure the amount of inventory on your shelves matches your records.

What is the meaning of cycle counting?

Cycle counting inventory is the process of taking a physical count of inventory on your shelves in groups of products at a time so that all inventory is eventually counted. After reviewing each group of products, the records get updated with the real-time inventory counts for those products. For large companies, a physical inventory count may entail closing business for several days to manually count and log every product in the entire warehouse. Doing so disrupts business, slows order processing, and can run up labor costs for overtime. By conducting a cycle count in your warehouse, you can update inventory counts for some products and update others at another date so over time the count for all products is regularly updated but not all simultaneously. Rather, group A may be updated one week, group B the next week and then group C the week after that. Cycle counting inventory accomplishes a gigantic task in smaller chunks to make it manageable and, often, less costly for your business to conduct. Naturally, if you have the benefit of cycle count software features in your inventory management software, you can update counts immediately across your business when you enter physical counts. Your inventory cycle count will be more productive with software that integrates the information across your business. Having the features of a cycle counting program plus much more will keep your business in line with demand.

How is cycle counting inventory different from annual physical inventory counts?

Cycle counting inventory differs from annual physical inventory counts in terms of frequency and scope. While annual physical counts involve counting the entire inventory once a year, cycle counting involves counting smaller subsets of inventory items on a regular basis throughout the year. This enables organizations to maintain more accurate and up-to-date inventory records without disrupting daily operations.

What are the benefits of implementing cycle counting inventory?

Implementing cycle counting inventory offers several benefits. It allows for more accurate and up-to-date inventory records, reducing the risk of stockouts or overstocking. It helps identify and resolve discrepancies and errors promptly, improving inventory accuracy. Additionally, cycle counting minimizes disruptions to daily operations compared to annual physical counts and provides valuable insights into inventory management processes, allowing for continuous improvement and better decision-making.

Benefits of the cycle count process are numerous:

  • cycle counting example
    Inventory Cycle Count

    Perform inventory counts during regular work hours without closing business.

  • Reduce number of workers needed to conduct inventory count.
  • If desired, update the best sellers more frequently than slower selling merchandise. If you use an ABC inventory method of classification to group best sellers or expensive items, you may organize your inventory cycle around it.
  • Alternatively, you can cycle count any given number of SKUs at one time. The approach can be as flexible as needed to suit your business.
  • Schedule cycle counting when it’s most convenient for your staff.
  • Continue conducting normal business operations even when cycle counting takes place.
  • Reduce errors, auditing costs
  • Identify causes of discrepancies sooner, i.e., if theft is occurring, investigate and nip it in the bud.
  • Increased profitability

The goal for any business is to increase inventory accuracy. The more time that elapses between inventory counts, the less accurate the count tends to be for several reasons:

  • Breakage
  • Spoilage
  • Theft
  • Misplaced Items
  • Incorrectly Entered Counts

Your aim is to increase inventory accuracy and you can judge how close you are to accurate numbers using a simple cycle counting formula:

IRA = 100% x (1 – difference between counted inventory and logged inventory) / Counted Inventory Items). This will give you a percentage which, ideally, will near 100% as you make improvements to your inventory counting methods.

If your business only performs physical inventory counts, they tend to be less frequent due to the disruptions and number of resources required. Cycle counting inventory makes it more manageable and, therefore, easier to follow through more frequently.

SOS Inventory gives you all the tools you need to keep your inventory counts up to date without tabulating with an inventory cycle count formula. Easily reconcile your real-time inventory counts with your ledger.

Cycle Counting Inventory and the Reconciliation Process

cycle counting inventoryThere are two parts to inventory in your ledger – the count and the cost. SOS Inventory syncs with your QuickBooks Online account to ensure your books reflect the inventory figures in the software. But reconciliation is necessary from time to time because your books can only be accurate if the original data is accurate. Just as you balance a checkbook, updating your inventory occasionally ensures your numbers match.

  1. From the finance side of the business, updating the numbers begins with running an inventory valuation report and then comparing it to the total of the asset accounts in QuickBooks to see if they match. If they do not, you will need to take action to correct the data.
  2. Next, you will check inventory in different stages of progress by running a work in progress report. Add these figures to the valuation report and recheck against the QuickBooks Online asset account.
  3. Run SOS Inventory reconciliation reports to ensure everything from SOS has synchronized to QuickBooks Online.
  4. If everything has synchronized, and numbers still do not match up, you know the discrepancy lies in the physical inventory count.
  5. Following any cycle count procedure, you can import new data into SOS Inventory to create adjustments in quantities or values, then edit and save those adjustments. They will synchronize to QuickBooks and correct those figures in your books.

Attain accuracy and make better business decisions with the end-to-end inventory functionality SOS Inventory gives your team. When you are cycle counting inventory or conducting a physical inventory, SOS Inventory makes it easier to synchronize data throughout your business for greater profits, less waste and better planning. You don’t need specialized cycle counting software when you have a robust software that gives you every inventory functionality you can possibly need.


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