10 steps to surviving counting inventory

It is that time of the year, the dreaded full inventory count. This blog lays out 10 steps to simplify the process, increase your accuracy and reduce the amount of time spent on this task

The prep planning is the key to a successful and accurate count, most of the prep work can be done during regular business hours and will both reduce the time you spend counting as well as minimize recounts.  Remember, an inaccurate count affects at least two years or stock levels and KPI analysis.

Preparing for the Physical Inventory

Schedule the Count Date

Schedule the date far enough in advance so that all involved have time to prepare for it. Plan for a date/time that is less busy. Ideal timing is right after an inventory clearing sales event before the new merchandise is received into stock.

Best practice tip: Give yourself at least 30 days to plan

Staffing the Count

Assign a specific role in the process to each person and make sure that they understand the role is fixed. Explain the need for accuracy. Of course consider your staff for the task, with thought given to checks and balances. If internal theft is a consideration, you cannot depend on an accurate count. You may want to assign personnel to areas which they do not have a direct associate with or other stores. Using an outside service provides an alternative, with the downside is that they can be costly and they do not have the same knowledge of the merchandise and stock locations that your team does.

Best practice tip: Use experienced team members in key roles, who have an understanding of the product and the count plan

Create a Fixture Map

A fixture map is a physical layout of the store with all stock locations. Each display, rack, stock location should be assigned a fixture map code that will be used for counting. When doing the physical counts, include the fixture code on the count sheets so you are able to tell which areas are not counts and where the merchandise was, if a recount is needed. The fixture map will also encourage all team members to use the terms in describing the completed work.

This will provide a critical map to a well planned wall to wall inventory count that assures that all product is counted.

Best practice tip: Organize fixtures so that the product is not varied, and the counts can be done systematically. Once counted they should easily be tagged as completed.

See the Physical Inventory

Before the count date, visit your inventory to understand the layout of the store and look for obsolete and damaged items. Make sure that the inventory areas are clean and organized; product is in their proper places and not mixed up.  Make sure all items have barcodes if applicable. Look for areas that may not have been considered in the fixture map, such as hold/layaway or merchandise that has fallen behind the display. Review all merchandise that needs to be returned to your vendors. Complete RMA’s and ship back or identify these items for the count. Consider products that you may want to markdown prior to the count to reduce the inventory. You can run category and attribute analysis reports and review Stock Days, Turnover and Return on Inventory Investment numbers  to identify products that should be targeted for markdowns.

Best practice tip:  Organize product on the shelves, removing damaged items and use discounts and promotions to clear obsolete ones.

Freezing Receiving and Transfers

To get an accurate count, all sales and movement of inventory must cease. Make sure that all store/warehouse transfers are completed and merchandise has been received into the system. New shipments received should be frozen, and seals should not be broken.  Review Open Transfers and Adjustments and make sure they are committed or errored out as appropriate.

Best practice tip:  If you can’t freeze receiving, then clearly define a physical not to be counted area for items that have not been received into the inventory.

Select the Count Method

There are a number of methods available and selecting the one that will work best for your business depends both on your type of inventory and how your merchandise and store are laid out.

Manual Count Sheets

Manual count sheets are simply forms to enter the product ID (SKU) and quantity. This method is effective for wall to wall counts using count teams, with one person calling out the SKU, price and count and the other recording the data. This allows you to pair an experienced person as the counter with the less experienced employee to record the information and helps less experienced personnel learn the inventory. The downfall is that there is room for mis-recorded SKU’s and it’s a manual process so more time consuming.

System Generated Count Sheets

Preprint the count sheet from your POS System and use this for recording the count. The biggest problem is that the form will not follow the logical flow of your merchandise layout. To much time can be spend flipping through pages searching for items. If some items are not included, you are more likely to miss them altogether. However, system generated count sheets are useful in narrower spot counts or warehouse locations where the inventory is well organized. Run an inventory balance report and download it to a CSV file so that you can sort it and prepare the count sheets.  Your final count sheets can be imported into the system to adjust your inventory balances; this will generate write-off amounts for you to review before you commit the counts.

Portable Inventory Devices

Using a portable inventory device can be the most efficient way to take inventory when all items are barcoded. You will not need the two person count team and merchandise can be counted quicker. These devices also automate the reconciliation process so that the store can complete the count quicker and be ready to unfreeze the inventory in less time. The primary hurdle is the expense of the devices. There are two options here; you can use Portable Inventory scanners or any Android phone to scan and count the inventory. The Inventory Manager application can be used to load the data into the system automatically or the data from Multiple devices can be combined into one count using mInventory.

Best practice tip:  Use digital tools whenever possible, organize counts in smaller groupings so you can easily recount, if necessary.

Conducting the Count

Controls over Count Sheets and Tags

Designate a responsible person to monitor and control the distribution and return of the count sheets. If you are using electronic counting, designate one person to monitor and coordinate activities. Use the fixture map to describe the counts.

Best practice tip:  Have one person in charge, who is managing the process. Everyone follows their plan.

Do it fast or accurate. Pick one.

For accuracy, enough time needs to be available to take the count, complete the count audits and recount as needed. If possible, start early in the day, while all employees are fresh and alert.

Although such a major inventory count is disruptive, resist the urge to focus on speed. The primary goal should be accuracy. Speed will come in time, but an inaccurate count does not provide any value to the store

Best practice tip:  With proper planning you have plenty of time, however planning will not eliminate errors from exhaustion.

Include redundancy

Even your best counter can make mistakes so instead of blindly adjusting inventory based on a single person’s count, steps can be taken. Have two separate teams conduct the count separately and compare the numbers to determine discrepancies and areas to look further into. Recount all items where discrepancies exist.

Best practice tip:  Double count all items, and triple the count the discrepancies


Depending on device/method used, determine that all inventory has been included. Investigate discrepancies and recount as needed. Document explanations. Determine the adjustment amounts. Make necessary system adjustments based on the physical count.

Deeper research into discrepancies can always be completed at a later date – in fact several weeks or months later, but the only time a physical count can be accurately verified is at the time all movement is frozen. So take the time, while you have the staff in place and focused on the inventory count to resolve any count discrepancies.

Once all data has been uploaded into retailcloud, review the potential write-offs and recount any items where the variances are outside the acceptable differences.  Check storage areas again for overlooked product.

Best practice tip:  Get the count rights, resist getting involved in reconciliation or adjustments until later.

A well planned and organized physical count is the basis of determining and analyzing shrinkage. Without a reliable physical count, analysis of the results will be unproductive. It takes a bit of work to initiate the implementation of the physical  count. But, in the end, when inventory is accurate and operations are running smoothly, the attention to detail will be well worth it.

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