Inventory Management

What Is Inventory Cycle Counting?

An associate takes inventory on a tablet.

Inventory cycle counts make it easier for businesses to achieve and maintain accurate inventory lists. And accuracy improves operations and saves your business time and money. That’s why it’s so important to perform periodic inventory counts. This article covers what a cycle count is, the purpose and benefits of inventory cycle counting, and how inventory management software can help streamline the process.

What is an inventory cycle count?

An inventory cycle count is an inventory strategy in which specific, defined portions of inventory are counted on a rotating, recurrent schedule. The schedule specifies exactly when each portion of inventory will be counted. This method spreads the count of inventory throughout the year (or another length of time), so you don’t have to to do it all at once.

Instead of auditing your entire inventory annually, you can schedule daily or weekly inventory counts of small groups of items. Although you can count and track stock on a spreadsheet, inventory management software that uses QR codes or barcodes can simplify the process and increase accuracy.

What is the purpose of cycle counting?

The purpose of cycle counting is to keep tabs on inventory by counting a specific subset of inventory at regularly-scheduled intervals. An annual audit of every little thing a company stocks often require businesses to shutter, and is often performed too infrequently to prevent inventory loss. Cycle counting offers business owners a helpful and effective alternative to costly and time-consuming inventory counts.  

You may also see an inventory cycle count referred to as an inventory cycle audit. 

Benefits of an inventory cycle count

Inventory cycle counts improve business processes in many ways. Consider three benefits.

1. Saves Time 

Instead of scheduling long annual counts of your inventory, cycle counts require smaller time increments and combat the monotony of extended inventory audits. That means you probably won’t have to shut down your store or ask employees to ignore their regular work just to take inventory. Everything is manageable!

Plus, frequent counts make it easier to identify lost, damaged, or stolen items in a large warehouse inventory. 

2. Saves Money

You’ll also save money with an inventory cycle count. Annual counts often require overtime hours (and closed stores!) to complete a full count of all items in your jewelry or HVAC inventory, for example. It’s cost-effective to set aside daily or weekly increments of time for counting groups of items. 

3. Improves Efficiency

An inventory cycle count maintains accuracy and improves efficiency in a variety of areas.

  • Purchasing – Make essential purchases and avoid wasting money on items that are in surplus or aren’t selling.
  • Production – Schedule production based on your customers’ needs. And manufacture the right quantity—at the right time—to avoid producing items that will sit in storage.
  • Sales – Communicate with your sales team about what’s selling well and what isn’t. It will help them build better business relationships and increase profits.
  • Marketing – Identify surplus items and schedule promotions to help reduce the quantity. You’ll no longer regret not knowing about surplus items and missing opportunities to sell them.
  • Finance – Many accounting calculations require an inventory count. Cycle counts help you calculate and run reports with confidence that the data is accurate and won’t require significant recalculations during tax season. 

Related: How to Perform an Inventory Cycle Count

Who should perform inventory cycle counts?

Inventory cycle counts should be performed by trustworthy, accurate associates in businesses that have the manpower to handle the audits without neglecting other work responsibilities. 

As always, business owners or inventory managers will need to weigh the pros of inventory cycle counting with the cons. Yes, inventory cycle counts provide frequent, accurate glimpses into inventory levels, but there are inventory apps that can help with that, too. 

Case in point: a small business with only a few stockrooms could probably get by with a full-on inventory audit once a year, or simply use inventory software to track changes to inventory as they happen.  

How should I handle errors in my cycle counting? 

If your cycle counts reveal inaccuracies in your inventory, you can either assume those inaccuracies occur across all your inventory, or you can audit your entire inventory to make sure. 

Another option: random sample cycle counting, in which your warehouse counts items completely at random, but gets to everything over a given period of time. This way, you can keep maintaining accurate inventory without losing too much productivity.

Another option: applying ABC analysis to your inventory counts. By counting only the most valuable, profitable items in your inventory, you can assert tighter control over your most important stock. 

Using inventory management software during cycle counts

Inventory is used on smartphones, a desktop computer and a tablet.

Many of the benefits of inventory cycle counting can be reaped from using inventory management software, and for a lot less effort, too. Inventory management software—or an inventory app—can help your employees or associates track inventory effortlessly and without errors. After all, human error is one of the chief flaws of inventory cycle counts. 

Inventory software like Sortly offers tons of key features that help you keep perpetual inventory in a fraction of the time. Sortly allows you to:

  • Keep track of current stock levels across multiple locations
  • Scan barcodes and QR codes to check items in and out, quickly update levels, or learn more about an item in an instant
  • Create robust, customized inventory details full of the information that matters most to you
  • Link pictures, attachments, and more to your items
  • Generate customized reports full of powerful insights into your business
  • Set alerts so you’ll know whenever an item is running low, approaching expiration or warranty end
  • Give customized access to your team, so everyone can help out
  • Access your inventory from any smartphone, tablet, or computer

Ready to simplify your inventory management? Try Sortly free for 14 days.