A thorough and efficient physical count process is an important part of controlling inventory, managing costs, and satisfying customers with accurate inventory quantities.But conducting a physical count can be a long, frustrating process if you and your team aren't prepared. Here are some best practice techniques that can help you conduct a speedy and efficient physical count.

Process a physical count - Overview

An overview of the physical count process: pre-count reports, resolving outstanding inventory transactions, count sheets, adjustments, completing the count, and reports.

Preparing and starting a new physical count

Prior to the Physical Count

  • Plan a meeting with your team ahead of time to go over the process. In this meeting, you should create two-man teams to count the inventory. You can assign each team to specific bin locations. If you have inventory spread throughout multiple stock sites, you can assemble specific teams to each stock site to conduct the count. The plan here is to have one person count the inventory while the other team member collects the data either manually on count sheets or with a barcode scanner. Breaking the count into small groups eliminates your team members from becoming too overwhelmed at the thought of having to count thousands of items.
  • Review any open transactions such as items on open orders, un-received items on purchase orders or items in transit between locations, for the items that are selected for the count.   Evosus provides a list of these transactions to review before the count sheets are generated.
  • Remove any defective items from your inventory so they are not part of the count.
  • Make sure you are closed during the days you are conducting your physical counts. Conducting business during this time can cause discrepancies in your count.

Time to Start Counting!

  • When the counts are being completed, have your inventory manager verify the counts. It’s best to start with your most popular items. These items can contain the most counting errors because of their turnover rate. Evosus can filter the count by fast moving items to expedite the count process.
  • As soon as the counts are verified, enter them into a spreadsheet or upload the data via your barcode scanner.
  • Prior to completing the count, review all data entered for discrepancies to avoid having to conduct a second or third count.
  • Once the count is complete, hold another team meeting to discuss the process and procedures. Discuss what worked, what didn’t, and what you could change for future counts. The whole point here is to get ideas on how to make your next count smoother.

This video covers the details of preparing for, and then actually starting the count. It discusses physical count filters, cycle counts, and the importance of resolving as many open inventory transactions as possible.

Start a new physical count (detailed directions)

  1. Open the Physical Counts Search screen (Administration > Inventory > Utilities > Physical Count).
  2. Click Start New Count. The New Physical Count screen appears.
  3. Stock Site - Select the stock site you are counting.
    • The following filters are applicable to manual paper counts only and dictate which items will be listed on the count sheet.  Items scanned using the P360 memory scanner that are NOT included in the count based on selected filters will be appended to the count sheet.
  4. Item Class - Item classes are a calculated value that display the popularity of an item using a letter grade (A-F).
  5. Product Lines - To select a product line department, select Product Line Department, and then click search.
  6. Ignore Zero Count On Hand Items - Exclude all items in inventory with a current On Hand quantity of 0.  These items will not print on the Physical Count List.  Keep in mind the quantity in Evosus might be 0, but the actual count may be different.  This may or may not be useful to you.
  7. Include Do Not Sell Items - Include items that do not have the Sell This Item box checked on the Item screen (Inventory > Open an item > Options tab).
  8. Vendors - Only items associated with the selected vendor (primary or secondary) are included in the count.
    • Vendors are associated with an inventory item using the Vendors tab on the Items screen (Inventory > Open an item > Vendors tab).
  9. Bins -  Physical Count will only include items assigned to that bin.
    • Bins/locations are created using the Locations tab of the Stock Site screen (Administration > Inventory > General Setup > Stock Sites > Open a stock site).
  10. Click Next.
  11. Review negative quantity items - A list of items with a negative balance appears on the screen. We recommend reconciling these items before starting the physical count.
  12. Click Next.
  13. Review items on order - A list of item on open orders appears on the screen. Review these items to confirm everything is properly marked as delivered and invoiced.
  14. Click Next.
  15. Review job materials - A list of items on jobs appears on the screen. Review these items to confirm everything is properly marked as delivered.
  16. Click Next.
  17. Review items on purchase orders - A list of items currently on open purchase orders appears. Review these items to confirm all item receipts are up-to-date.
  18. Click Next.
  19. Click Start the Count.
  20. Click OK on the confirmation message that appears. The Physical Count screen appears.
  21. The physical count has been created. Use the Reports tab to generate physical count sheets, and use the Import tab to import the physical counts.

Manage/complete an active physical count

This video shows you how to fill out the count sheet to make the Adjusting Entries process more efficient, make adjusting entries, complete the count, and review available reports.

Disadvantages of the once a year count

Many businesses implement a once-a-year count immediately prior to year-end.  This count process generally entails closing the store and counting all inventory items in one sweep. While this may ensure you have the most up-to-date inventory count possible prior to year-end, it is not necessarily the most efficient or accurate way to perform a physical count. Employees get bored, the pizza at lunch fails to motivate and you're left making adjustments simply because you want to go home.

Advantages of cycle counts

 An alternative to a single year-end count is cycle counts. Cycle counts allow you to count smaller sections of inventory over a period of time rather than grouping everything together in one day.  By keeping the counts small, you're able to avoid closing the store for an entire day or weekend.  If the counts are sectioned properly, you should be able to complete each count within a couple of hours. 

 Rather than closing the store for a day and bringing loads of employees in to count, you can break your year-end count into categories by product line and spread the counting process out over a couple weeks. You're still counting everything at the end of the year, but you're not forced to do it all in one day. Instead, a couple employees can come in early or stay after each day to complete the counts. For instance:

Day 1
Day 2
BBQs and Accessories
Day 3
Day 4
Day 5

Another cycle count option is to continuously count specific subsets of inventory throughout the year to ensure consistently accurate inventory levels.  For instance, you could schedule your BBQ Accessories to be counted on the 5th of every month while your BBQs are counted on the 10th.  Cycle counts can be performed at any frequency you determine such as monthly or quarterly. This type of cycle count does not substitute an end-of-year comprehensive count, but rather supplements this count by keeping inventory accurate throughout the year.  Cycle counts allow you to keep your valuation and general ledger values in sync through the year which will generally make your accounting staff happy! 

Update Manual Physical Count (detailed steps)

  1. Open the Physical Counts Search screen (Administration > Inventory > Utilities > Physical Count).
  2. Highlight the Physical Count and click [Update].
  3. Select the Adjust menu option.
  4. Enter the Transaction Number in the field provided.
    • The transaction number can be obtained from the printed count list for manual counts or the Exceptions menu for scanned items.
  5. Hit the Tab key on the keyboard to move to the next field.  Once you hit Tab the Item Details will appear in the box to the right.  Information such as Product Line, Item Code, Item Quantity and Quantity On Hand will appear.  Use this information to verify transaction numbers and quantities.
  6. Enter the first exception Transaction Number in the field provided.  Hit the Tab key on the keyboard to move to the next field.  Once you hit Tab the Item Details will appear in the box to the right.  Information such as Product Line, Item Code, Item Quantity and Quantity On Hand will appear.  Use this information to verify transaction numbers and quantities.
  7. Enter the "Change to Quantity" in the field provided. If the Actual Count has been changed before, either through manual adjustments or a scanner import, a blue message will appear indicating the count was previously changed and the Add Quantity to Current Actual Count check box will be available
    • Check this box if you wish to ADD the new quantity to existing count amounts.  Uncheck this box if you want the new quantity to OVERRIDE any existing count amount. After entering a quantity and tabbing off the field, text will appear below the Save Adjustment button which displays the NEW count figure based on the value of the check box (checked or unchecked) and the quantity entered
    • It is recommended to check the box if you are combining a manual paper count and P360 scanner count. This will add the manual count quantities to the scanner import quantities for like items.  It is recommended to uncheck the box if you are editing previously entered manual adjustments or scanner imports. This will override the current actual count for manual and scanner import counts for that item.  All adjustments
  8. Click [Save Adjustment] (or hit <Enter> on the keyboard).
  9. Repeat Steps 3 – 7 until all adjustments have been entered. Note:  If you need to save the current adjustments and add more later, go to the Complete Count menu option and click [Exit and Come Back Later].  This will save your changes and allow you to continue the entries at a later time.
    • To view a list of exceptions at any time during the adjustment process go to the Exceptions menu option and click [Print Exception Items List] or go to the Reports menu option and click [Exception Items List].  This will show you a list of all adjustments that have been made to this Physical Count.
  10. Once you have completed all adjustments, go to the Trxs Since menu option to review any inventory activity that occurred during  the count process.  Trxs Since lists all counted items where inventory has taken place since the start of the count.  If items are listed, check all items that you wish to include in the count.  You will have two options for dealing with the remaining unchecked items.
    • “Exclude all unchecked items from the count” which means all unchecked items will be excluded from the final count and no physical count adjustments will be made.
    • “Roll unchecked items into New Physical Count” which means all unchecked items will be excluded from the final count and no adjustments will be made; however, a new physical count including ONLY the unchecked items will be created.  This allows you to continue working with the items after the physical count is posted.
  11. Once you’re done, go to the Complete Tab and click [Post Quantity Adjustments].  All quantity adjustments will be made to inventory.