Inventory Cycle Count vs. Physical Count: Which Is Best?

April 20th 2021 11:00:00 AM

According to the Federal Reserve Bank, more than $674 billion in unsold inventory was sitting in warehouses and retail stores in Q4 2020. If this inventory is not moved out and sold to customers, it can end up sitting in inventory far too long. The longer inventory sits without being sold, the longer it is a drain on your company’s cash flow.

It’s crucial to keep track of your inventory cycle counts and physical counts. They need to be accurate to give you a true picture of what you have in stock. If you are holding too much in inventory, you run the risk of tying up funds that could be used for other purposes. A situation where too little is held in inventory can mean out-of-stocks and a potential for lost revenue.

Is keeping track of inventory cycle counts and physical counts an issue for your business? Are you looking for an immediate solution? Take the next step by contacting us online or calling (330) 645-9959 to arrange an appointment with a Scanco Solutions Expert.

Reasons to Conduct an Inventory Count

Before you expend time and resources on inventory counting, you’ll want to know whether this activity is worthwhile. Here are some reasons why conducting an inventory count makes sense:

1. It tracks current inventory status.

An organized inventory-tracking system gives you an overview of the items that are selling well and which ones are slower to move out of the warehouse. It also tracks where your stock is located if you have more than one warehouse.

2. Inventory counts locate discrepancies.

Ideally, there should be no difference between quantities that should be on shelves or in bins and what is physically in the warehouse.

3. Planning and forecasting capabilities become more accurate.

Inventory management software can be used to analyze data collected from inventory counts to predict which items will perform well in the future based on past performance.

4. Customer service improves.

Once inventory is being tracked regularly, orders are placed on a set schedule. Deliveries of new stock arrive at regular intervals, too. Customers can be advised when the next delivery is expected. The customer may be more likely to wait for their delivery if a set date is attached to it rather than if they are simply told the item they want is out of stock.

What Categories Should be Included in your Inventory Count

Now that we have discussed why you need to perform an inventory count, let’s move on to the categories that your team should be counting.

• Items for sale to customers
• Raw materials
• Maintenance items (these don’t become part of your end product)
• Furniture and fixtures
• Equipment (owned)
• Leased equipment
• Company vehicles

Inventory Cycle Count vs. Physical Count

Each type of inventory count is used in different circumstances. Both have their place in modern business.

Inventory Cycle Count

Inventory cycle counting is one of the most common inventory count procedures. Instead of counting everything held in inventory, the business counts only a certain number of items at one time. Cycle counting is used to get a sample that can be used as a reference that can be applied to the rest of the inventory held in the warehouse.

If the inventory numbers are inaccurate in the inventory cycle count, then they will likely be inaccurate in other parts of the warehouse. However, if the inventory numbers are accurate in the inventory cycle count, then they are likely accurate throughout the warehouse.

Advantages of Using Inventory Cycle Count:

• Inventory cycle counts can be scheduled as part of the normal working day.
• They can be performed without shutting down the warehouse.
• Over time, your team members can move through the entire inventory.

Physical Count

A physical count is completed by counting each item in inventory. The count is compared to company records so that any inaccuracies can be eliminated. Ideally, you should perform a physical count at least once per year.

Advantage of Using Physical Count:

• This method allows for the most accurate inventory count, although it is challenging to complete without shutting down the warehouse. As your team members are working on counting inventory, new inventory may arrive or orders may be shipped out otherwise.

Scanco has Solutions for All Your Inventory Counting Needs

Are you considering automating your cycle counting and year-end physical count? Scanco Mobility gives your team members the ability to count inventory with a mobile device. Sage barcode scanning hardware is available in several configurations to fit your team’s preferences and your budget. They can throw away pen and paper—at least when it comes to doing inventory! This task becomes much quicker, more convenient, and much more pleasant. You eliminate the need for data entry since your team simply scans bar codes and sends the counts directly into Sage 100. All counts are updated in real-time, too.

Scanco’s Mobility module handles cycle counting and physical inventory counts with ease. It operates on WiFi or Cellular, and can easily be installed on any Android, Windows, or iOS mobile phone.

Your management team can see reports by type within a range of selected dates. They can view the reports on-screen or print them for easy reference.

Scanco Warehouse also gives your team the capability to automate inventory transactions. This solution’s powerful features include Physical Count by Item—by Bin, Inventory Transfers, Inventory Receipts, and more. It gives your team next-level tracking with the ability to automate bin locations. You will always know exactly where your inventory is situated, even if you have multiple warehouses.

Ultimately, you will need to determine when to request that your team conduct an inventory cycle count and a physical count of inventory. It’s important to track more than just stock available for sale for tax records and insurance purposes. Scanco can personalize an inventory solution that will work for your business. Discover more by contacting us online or calling (330) 645-9959 to set up an appointment with a Scanco Solutions Expert.