Fail to prepare is to prepare to fail when it comes to the laborious annual process of counting and adjusting inventory at the most financially critical time of the year in Australia. The good news though is that the physical stock count process can be made easier with preparation and dedication to making it as organised, automated and process driven as possible. We rounded up our favorite best practices for how to count stock inventory.
An annual stock count is typically undertaken for use in a company's financial statements as part of the End of Fiscal Year (EOFY). In Australia, businesses wrap up their books and begin finalising their tax paperwork on 1 June each year. Across the pond in New Zealand, they do this same process from the 1st of April. Physical stock count is crunch time, and many businesses like to start preparing before the finalised count takes place. Here are some steps to get started:
Make sure the space you store your inventory in is organised. Group the same stock together, separate out different stock, put stock into piles, and label everything. Whilst this may seem like a given, this often overlooked step is critical to identifying items out of place before the count. If not taken care of, it can become an issue during counting, which will either create a counting mistake or unnecessary questions during the count.
Segment your inventory by A, B, or C in order of their importance. A items are high velocity, high value or items that tend to have inventory accuracy issues. The next group are classified as “B” items and are less frequently needed and may have a shorter reorder time than A items, and the remainder are classified as “C” items and are slow moving and rarely restocked items. By limiting the volume of C items leads to less stockholding of those items which take up space and are slow-moving and offer a lesser yield to the business. Major ERPs, like NetSuite Inventory Management, have built-in function of ABC analysis.
By knowing your inventory ABC’s you will be able to look out for obsolete stock or stock that has expired, and deal with this before EOFY deadline hits. Some organisations also use this sense of urgency around EOFY to have a retail sale. This serves to two purposes - to rid themselves of last season’s items and have less to tally at the physical inventory stock count.
Decide the type of physical count you are going to have – a blind count or a directed count. A blind count (no quantity information) will help uncover items that are either not in your ERP or not in the right location. A directed count leads you to count a specific quantity. The management of these two counts is very different, and you might decide that a combination of the two is needed for your business.
Another critical part of the plan is determining how you will verify that everything has been counted. You might decide to use a physical marking, like coloured dots on each rack or shelf to signify it has been counted. By determining your plan ahead of time, there is less confusion around the process. It also means that labour can be allocated to getting the stock count completed now and then reviewed and tweaked later.
Incorrect captured units of measure, items being moved mid-count or counted twice during the inventory stock count process can all lead to inaccuracies. Having a designated resource reserved to recounting and approving quantities is critical to ensure an accurate stock count. This resource should follow steps like grouping items with a variance into very small counts to conduct the recount.
Having minimal data entry during your EOFY stock count will reduce human error and limit the number of recount inquiries. Mobile data collection empowers your warehouse staff. Having a device on hand that accurately captures inventory movements and updates in real-time ensures that your stock is current and correct. It also verifies that all items have been counted.