Cycle Counts: The Secret to Getting Your Inventory In Good Shape Year-Round

Cycle Counts: The Secret to Getting Your Inventory In Good Shape Year-Round
Improve your inventory accuracy with cycle counts and understand the importance of cycle inventory in operation management. Here are some tips to get started.
by Bridget McCrea Feb 10, 2021 — 4 min read
Cycle Counts: The Secret to Getting Your Inventory In Good Shape Year-Round

It’s impossible to sell in different ways if you don’t know what’s in stock. The importance of inventory management has only increased during the pandemic, as many sellers have changed how they operate their businesses.

That’s why it’s important to have a deep understanding of your inventory. It not only ensures accurate financial, accounting, and tax records, but it also leads to faster order fulfilment, fewer overstocks and stockouts, and happier customers. More frequent counts, called cycle counts, can prevent your inventory counts from getting out of hand since you’re doing it more than once a year.

If you’re not already using cycle counting to keep your inventory accurate, here are some tips on how to get started.

How to improve inventory accuracy with cycle counting

Many companies conduct annual physical inventory counts using pencils and clipboards or through a bar code scanner that sends those details to a retail POS system. And while the approach sounds simple enough, you may also benefit from more frequent counts, particularly if you’ve had to make changes to your business.

Cycle counting involves counting specific sections of inventory (but not everything in stock) during a specified period of time. Like annual counts, the process can be handled manually, using automation, or a mix of the two. You can experiment with different strategies, like only counting your necklaces and rings during one count, and then your bracelets and earrings in the next one. Or you could do an ABC cycle count, where you divide your inventory based on the sales brought in, investing more time counting the groups that bring in the majority of sales.

With cycle counting, the idea is that your entire inventory will be accurately accounted for during the course of a year. That means you can identify and address any discrepancies or errors as they surface during the individual cycle counts instead of waiting until the end of the year to do something about it. You also don’t have to shut down your operations to count inventory since you’re doing it on a smaller scale.

Cycle counting also leads to higher levels of inventory record accuracy, according to AdaptaLift Group. This, in turn, translates into higher confidence in your final inventory valuation (how much your company’s total inventory is worth at a specific point in time). Over time, the need for full physical inventory counts diminishes because your records are accurate enough to eliminate the need for periodic physical verification.

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What types of companies use cycle counting?

As a universally accepted inventory management practice, cycle counting is popular with businesses of all sizes and across most industries. Here are just a few examples of what it could look like.

eCommerce seller

An eCommerce business that would otherwise have to shut down its warehouse for a week (or more) to get an accurate tally of its current stock, for instance, can use cycle counting to perform that task on a rolling basis.

Clothing boutique

A clothing boutique with multiple locations can also benefit from cycle counting. It would select a section of its warehouse, storeroom, or retail stores to count at any given time. Those tallies would then be recorded in an inventory management system, with the goal of counting the complete inventory over a specified period of time.

Wine store

A small wine store that repeatedly finds itself out of stock on some of its more popular products can use cycle counting to gain more control over its procurement and fulfilment processes. When you know that a certain type of wine will be wildly popular during the summer months, you can adjust your order quantities based on the cycle counts.

Getting started: The cycle counting process

If you’re using cycle counting for the first time, here are four strategies to help you set up and orchestrate the process:

How to have accurate inventory year-round

Whether you use full, annual inventory counts or cycle counting, it’s essential to know how much stock you have on hand, which items are gathering dust on warehouse shelves, and which should be replenished more frequently.

Where annual physical inventory counts might require you to close your store, interrupt fulfilment processes, and take a week or more to complete, cycle counting is a perpetual process that can give you an accurate reflection of your inventory year-round.

See how Square for Retail’s new inventory counting tool can make your cycle counts more efficient.

Bridget McCrea
Bridget McCrea is a freelance writer specializing inbusiness, supply chain, and technology.

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