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What is an Inventory Count?

Updated on September 18, 2014

During an inventory count each currently unsold item gets counted and the data will be processed to gather valuable information. Here's a few things to keep in mind for your inventory counts.

Every business should do regular inventory counts. It doesn't matter if you're running a mom & pop store, a retail chain of clothes stores or a high-end boutique, an inventory is a goldmine of information for a store owner.

It's important to know what you sell (there are always some surprises during big inventory counts) and how much of something you have. Even if your hunch is important and useful when running your business, it never beats cold statistic approach where you have all the information in front of you.

It will help you identify product categories which work well and some which simply cost you money, sitting on shelves. You'll be smarter the next time buying goods to sell.

An inventory count is also important for insurance cases. In the long run it will also help you prevent theft. Don't forget - most of theft is committed by employees themselves, show them you keep your eye on your goods.

The more complicated and discouraging your inventory count seems before conducting one, the more of a reason you have to go for it.
The more complicated and discouraging your inventory count seems before conducting one, the more of a reason you have to go for it. | Source

When to do an inventory count?

An important question you need to ask yourself is when to do the inventory count. Although there is no one right answer for it, here are some patterns you should keep in mind.

Take a look at your last year's results. Pick a calm day in a quiet week. Avoid closing early - an inventory count can be done in few hours even in bigger businesses. Most probably it will fall at the same time as school vacations or for example the last week of December where after almost one month of non-stop holidays people are too tired (and don't have any money left) to do more shopping.

It's a great idea to do at least two inventory counts a year. If you work with seasons and collections as sports goods, clothes, toys etc, make sure the two inventories would fall at the same period compared to sales and beginning of the collection. This will make the information gathered more useful and usable in the big picture.

How to do an inventory count?

If you will do the inventory count with your own employees, make sure they are motivated to do it fast and as well as possible. Don't hesitate rewarding them with a bonus corresponding to one day's salary (better than hourly wage doubled for instance) or some other kind of reward if the count is conducted rapidly and with little error.

Divide the whole store and stock into sectors and assign specific sectors to each person. If you have a system employing bar codes, make sure already before the count that all items have their tags and can be scanned quickly.

Beware of misplaced stocks. Nothing worse than forgetting a hidden cupboard filled with say, 200 keychains. This will look like a huge loss and at the same time a huge problem of theft, even if there really is none.

If employing helping hands, make sure they also are rewarded for their effort. Try not to leave counting alone - not for the security risk, but to avoid errors. Always have somebody around to answer all questions and keep an eye on temporary workers.

What to do with the information gathered?

Process and analyze.

Make sure that you will have statistics showing quantity sold (proof of transaction either from the till system or with the receits) which will also give you quantity missing.

Analyze the loss. It is possible to find clues to avoid future loss. How did you lose the items? Perhaps there's a part of your store which effectively isn't under sufficient surveillance and it gets stolen by customers. Or you might discover missing expensive items which are difficult to steal from the store meaning that there is a discipline and confidence problem among your employees.

You will be able to identify products which work well and can be ordered in bigger quantities and at the same time discover under-achievers which should be quickly put on promotional sale or offered with higher discount already in the beginning of your seasonal sale.

Discuss the results with the person responsible for product placement. Goods that sell well should not be over exposed at the most visible places in the store nor on windows and mannequins (naturally, be sure not to penalize them for their success neither).

The Final Checklist

  • Prepare. Make sure everything has their tags and the counting would be an easy and fast task.
  • Pick a good time. Count only after closing the store (to avoid errors) and if you have to close earlier, do it off-season - right before sales or after holidays for instance.
  • Organize. Try to have each category of goods to be only in one part of your stock and store.
  • Trust your team, don't even try to do it all alone. You are only bound to commit errors and have untrustworthy data.
  • Reward and motivate. Make sure the inventory count would go quickly and people would pay attention. You know your team, make sure they are up for it.
  • Process all the data gathered the day after. Make data sheets where you see as much of product movements as possible. When it has entered your stock, how much time did it take to sell it and what is missing.
  • Analyze. For all the answers you got studying the statistics, ask yourself why and what can you do to improve the situation.
  • Compare the results with last season's inventory count done at the same time frame. You'll see what has improved, what didn't work.
  • Repeat at least twice a year.

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