The 7-Step Plan for Physical Inventory You Can Count On

The unavoidable physical inventory count is always a drag, but there are strategies to optimize your efficiency, make the most of the count, and limit the frequency of counts.

We may receive compensation from partners and advertisers whose products appear here. Compensation may impact where products are placed on our site, but editorial opinions, scores, and reviews are independent from, and never influenced by, any advertiser or partner.

Physical inventory counting is about as unsexy as the retail world gets. It’s just above cleaning the store restrooms and below receiving inventory into the store. But alas, taking the time to get an accurate count is an essential component of retail inventory management. It’s time to stop procrastinating and put a plan in place to count your inventory.

No matter if you’re at the beginning of a new inventory cycle or at the end when stock is low, every day of operation without an accurate count opens your business to unnecessary risk. Your inventory turnover ratio, on-hand inventory, and all other critical measures require an accurate count.

Retail manager counts her physical inventory and inputs it into her POS tablet.

Physical inventory counting is a necessary evil in the retail space. Source:

Lightspeed POS software.

Here are seven strategies to help you count and audit inventory efficiently and accurately. These recommendations will set you on the right track, but what’s most important is that you get in there and get it done. It’s not going to count itself...yet.


1. Map out your store, make a plan, and stick to it

When it comes to proper inventory control, always remember the six P’s (7 if your name begins with a P!) — Prior Preparation Prevents Piss-Poor Performance...Patrick.

Keep that in mind the next time another physical inventory count is imminent. If you want to conduct an accurate count that’s efficient and doesn’t break you mentally, it’s best to plan your course of action. This is especially important if you have staff members joining you for the count.

The amount of planning you’ll need depends on how much inventory you have on hand, how it’s organized, and how large your store or warehouse space is.

Your first step in planning a count is to determine how many people you need on hand. Get them on the schedule and make sure to confirm with them so they aren’t blindsided by a seemingly random inventory count.

If you’ve got a 1,000-square-foot retail space with no backroom or warehouse, you’re probably counting on your own. That’s fine, you still need to determine how you’re going to complete the task.

A map of a retail store that highlights individual sections.

Make a map of your store, establish a plan, and stick to it. Source:

Smartsheet software.

After securing your team or realizing you’re going it alone, it’s best to literally map out your store or warehouse space and then lay out a battle plan to best attack the count.

It seems simple enough, but you’d be amazed how many folks aimlessly walk through their store and count items at random. That’s a great way to forget where you were, overlook an item, and put yourself in a position where you’re debating starting over. Not where you want to be three hours into a physical inventory count.

And finally, you need to determine how everyone can best capture the inventory. Are you thinking of a manual count with pen and paper? A shared spreadsheet? Or perhaps everyone has a POS terminal that they carry around and input counts into? Regardless of what works for you, you need to define your strategy.


2. Staff appropriately for counting day

It’s critical that you appropriately adjust your in-store staff to account for inventory counting needs. Overhead needs will vary depending on the size of your store, the amount of inventory that you have in-house, and the extent to which it’s all currently organized.

It may be prudent to close your store for the day or at least for the time required for the count. Many resources will recommend scheduling to close outright, but not us — and especially not in this economy.

Your inventory counting day doesn’t have to mean a day of lost business. But it might as well if you don’t staff up to meet your required headcount in addition to your everyday needs.


3. Use barcode scanners

Implementing a barcode scanner is the single best thing you can do to optimize your inventory counting.

A barcode scanner becomes the actual recording mechanism for your physical counts. You and your staff must simply point and fire the scanner at each item’s barcode. It won’t completely remove human error, but it’s a great start.

A store associate scans an item with a barcode scanner app on their smartphone.

Set your staff loose to count inventory and scan items into your inventory system using their phones. Source:

Evolve AR.

And you don’t even need to purchase scanner guns. These days you can have your staff download an inventory app on their phones and use that to route information back to the inventory system.

Of course, barcode scanning only works if you have the related back-end inventory management system set up. Without this, your barcode scanners have no place to route the scanned information.


4. Transform the physical into the digital

You’ve got to get an inventory management system set up for your store. It’s the key to unlocking barcoding scanning, and it’s also so much more. The implementation of any type of inventory management system empowers you with automated reporting, purchase ordering, and alerts as items cross pre-programmed low thresholds.

There are a few different inventory management types. The most common two are:

  1. A POS inventory management system combining inventory and retail POS features.
  2. A standalone inventory system with stock counting, warehouse maintenance, and more.

Even the inventory components within your POS system put hours back in your weeks and days back in your year. Once implemented and properly set up and managed, your inventory system will provide a backstop that reduces how often you need to turn to physical inventory counting.


5. Deal with issues in the moment

You won’t come across any issues in your inventory counting. The line items will all add up, and everything will be accounted for. Come on, you’re smarter than that. You run a retail store and you know to always prepare for the worst.

While inventory issues aren’t necessarily “the worst,” they are something that you and your staff need to deal with in the moment.

You put yourself in a unique position as you count each piece of inventory, and it’s in that position that you need to remedy discrepancies between expected inventory and actual inventory. By writing it down and addressing it later, you remove yourself from the moment and risk missing the frame of mind required to handle each specific issue.


6. Solicit feedback on the counting process

This is a general best practice that you as a manager should be implementing across the board. But if you’re going to ask your staff to plunge into the depths of physical inventory counting with you a few times a year, the least you can do is solicit feedback and ideas on improvements from them.

Give them a voice and a safe space in which to critique and recommend improvements to the counting process as well as how to best manage accurate inventory status between counts.

These are your folks on the frontlines. Even if you’re on the frontlines with them, they have a completely different perspective than you. Tap into it and take advantage of the wonderful ideas sitting there.


7. Reward your employees for a count well done

Rewarding your staff for a count well done is even more important than soliciting feedback and improvements from your staff. Reward ideas include pizza, age-appropriate drinks, gift cards, and maybe even some milk and a few boxes of Count Chocula if you’re into puns.

A box of the classic Count Chocula with a full bowl of the cereal.

Is this a hilarious pun for a post-inventory counting celebration or do people even eat breakfast cereal anymore? Source:

Eater.

And then there’s the saying as true as time: Money talks. If you have an enormous store and/or warehouse, you may need to incentivize your squad. A one-time monetary bonus could work, or maybe consider offering time-and-a-half pay for the hours spent counting. You don’t need to break the bank on this, but the amount of effort put into it should come with an equally generous reward.


Physical inventory counting can be bearable

Physical inventory counting stinks. It’s an unquestionably time consuming and monotonous process. But it must be done at least once a year, even if you have an incredibly accurate inventory management system. There’s no way around it, so consider implementing the tips shared above to make your next count more bearable for you and your team. Put on some music, grab your scanners, and don’t forget to carry those ones.

The Ultimate Guide to Building Virtual Teams

Knowing how to build a strong virtual team is more important today than ever -- and there are six critical things you must do to succeed. That's why we've created this ultra-timely 19-page report on what you should be doing now to set your virtual team up to win.

Enter your email below to access our (no-strings-attached) free report, "The Ultimate SMB Guide to Building High-Performing Virtual Teams."

The Motley Fool has a Disclosure Policy. The Author and/or The Motley Fool may have an interest in companies mentioned.