An accurate inventory count is critical to keeping your business profitable. An inaccurate count affects your ability to provide good customer service, as well as the efficiency of the company overall. These factors ultimately result in lower profits, which will hurt your company.
Physical Counting vs. Cycle Counting
It seems like a simple thing to keep an accurate count of inventory. Still, anyone who has ever conducted a physical inventory knows that “simple” does not accurately describe the process. Often it involves shutting down normal operations while recruiting additional labor to get the job done and there is always the possibility of errors that can throw a monkey wrench into everything.
Cycle counting is another option. Cycle counts are conducted continuously over a given period of time to ensure that everything is eventually counted. To generate increasingly accurate information about their entire inventory, companies use sampling techniques similar to those used by pollsters. To test whether different individuals get the same results, companies cycle count the same item repeatedly. The goal is to identify and fix problems in counting methods so that everyone uses best practices and produces accurate results.
Which option is better for your company?
Physical Inventory Counts
When a company conducts a physical inventory count, a chunk of time must be set aside each year so that each individual item can be counted manually. Usually, business stops during this time to ensure the count is accurate while a team of people, usually hired from outside, pulls products from every nook and cranny and then scans each item.
Typically, this event kicks off the new financial year so businesses can adjust their books and make appropriate decisions based on their current inventory. The entire process is quite labor intensive, but it’s considered a normal and necessary facet of conducting business, even knowing that a physical count may not be entirely accurate.
Fortunately, physical inventories can be more accurate with the use of ScanForce. Sage 100 users can leverage barcode and mobile technology to automate inventory and other warehouse tasks with ScanForce’s innovative software solutions.
Cycle Inventory Counts
It is common for cycle counting to take place every day. Counting the items associated with roughly four or five SKUs per day, for instance, can help a company tally its entire inventory over six weeks if it has 1500 SKUs. It is common for certain companies to dedicate employees to cycle counting and to include it in their broader day-to-day duties.
Internal or external auditors typically carry out a cycle count to ensure reliability and accuracy. If cycle counting proves accurate over time, auditors and accountants may accept them instead of full physical counts.
There are several different methods of counting cycles. The method type determines which items are prioritized, and companies may count high-priority items more frequently than others.
The warehouse management software from ScanForce helps you meet demand, improve productivity, increase visibility, and reduce expenses while improving cycle count.
Which Is Better?
Many companies find cycle counting to be more beneficial than physical inventory counts. First, it is less disruptive. Counting only a small portion of your inventory at a time allows the business to continue operating. It is easier to manage cycle counting throughout the year than a single massive count at the end. Secondly, it is possible to uncover problems that might worsen if left unnoticed until the next full physical inventory count due to the continuous generation of counts.
Physical counts are useful for providing accuracy about inventory at the beginning of a new financial year; cycle counting is more flexible and agile, providing up-to-date information that helps businesses make better decisions. It is possible to avoid excessive orders and use cash more efficiently if a company has current cycle counts for key SKUs or manufacturing parts.
Both methods aid businesses in fixing errors before they get out of hand.
Some companies use both cycle and physical counts. For example, retailers may cycle count stock all year, focusing on high-demand items. Later they may conduct a complete physical inventory. In other cases, companies may perform one final physical count before transitioning to cycle counting.
Optimize Your Method
Whether your company relies on cycle counts, physical counts, or both, accurate inventory doesn’t just happen. An effective and reliable inventory system and a team trained in evaluating errors, reconciling records, and updating information are necessary.
Whatever method you choose, we can help to make it more effective and efficient. Contact us today to learn more about how ScanForce and Sage 100 can make your inventory tasks easier.