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10 Solid Tips For Taking A Physical Count of Inventory in Your Warehouse

Taking a physical count of inventory


Taking a physical count of inventory is a task met with dread by most retailers.

Closing stores. Pausing warehouses. Paper inventory lists. Endless counting, re-counting and correcting.

It can be a total nightmare.

But it’s a necessary nightmare for good inventory management. And one that can be made a lot easier when accompanied with proper:

  • Planning.
  • Structure.
  • Efficiency.

So in this post we go into 10 practical tips for taking a physical count of inventory in the quickest, most accurate and hassle-free way possible.

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Taking a physical count of inventory: What is it?

The aim of taking a physical count of inventory boils down to making sure there’s complete parity and accuracy between:

  1. The actual stock quantities sat in your warehouse or store(s) for each item of inventory (and its variants).
  2. The recorded stock quantities in your inventory spreadsheets or inventory management software.

This helps prevent overselling at one end of the scale, but also ensures you aren’t needlessly re-ordering inventory at the other. Plus, there’s the small matter of getting inventory valuation right for your tax returns.

In short:

It’s crucial for any retailer or warehouse operator to regularly make sure the recorded inventory matches up with actual inventory for every single SKU.

There are two broad options you’ve got for taking a physical count of inventory:

  1. Manual inventory count. This traditionally involves pausing activity at location in order to conduct a planned count via paper lists and sheets to record numbers manually.
  2. Digital inventory count. This involves using a smartphone app and/or barcode scanner to check and record numbers into a centralised inventory system electronically.

In the rest of this post, we’ll take a look at some ideas and strategies to improve inventory counting efficiency using both digital and manual options.

Looking for more inventory help? Check out Inventory Management: A Complete Guide For Retailers!

1) Plan ahead

Whatever methods you use and however regular you conduct them, make sure to schedule your counts well in advance.

It’s worth noting when your typical sales down curves are and scheduling for then.

For example:

Many retailers will find that end of January is a slow period. Whereas the run up to Christmas is definitely not a time you want your staff to be burdened with a large inventory count.

Get your counting date(s) in the diary, then:

  • Assign any extra shifts to relevant employees.
  • Notify your team.
  • Let customers know if you’ll be closing a physical store during business hours.

If doing your count manually, then you’ll need to shut down activity at that location for its entire duration. No stock should be moving in or out at any time to ensure complete accuracy.

2) Know your warehouse/store layout

Counting the inventory within a store or warehouse is infinitely easier when you have a clear map of everything in that location.

Sketch out every:

  • Wall.
  • Rack.
  • Shelf.
  • Display unit.
  • Work station.
  • Backroom.

And anything else relevant for the location in question.

So you should end up with a clear bird’s eye picture of everything in there:

Warehouse Layout

You can then number each display, rack and shelf to signify different sections. Which leads us on to…

3) Label your warehouse properly

Labelling your warehouse is not just essential for efficient inventory counting, but general warehouse management best practices too.

Give every rack/row, shelf and bin location on your map a number:

Warehouse Labels

Then include these on your tracking sheet to tick off and update as you’re taking a physical count of inventory.

You’ll also be able to easily assign different team members to specific sections in order to complete your count faster on the day.

4) Train your team

Counting inventory may sound like a pretty straightforward task. But there’s a lot of procedures and systems involved when done right.

And the staff members need to know exactly what these procedures are and how they work.

So either:

  1. Organise a training session before the date of your count.
  2. Allow time for a training session on the day before any counting begins.

This will take your team members through aspects like how to count effectively, what forms will be used and how to use any equipment involved.

5) Use inventory tags

Inventory tags are a great way to easily keep track of what items have been counted. Again, they’re especially useful if completing your count manually.

Inventory Tags

First, make sure to get two-part tags. Then simply get your team to fill them out as they conduct the count – attaching one to the relevant warehouse place, and keeping the other for reference.

6) Break your team into counting partners

So by now you’ll have:

  1. A dedicated team of people shifted to work on the day of the count.
  2. A clearly dissected, mapped and labelled warehouse.
  3. An adequate number of inventory count tags to use.

Now it’s time to break your team into counting partners.

This means breaking your team into pairs. Then assigning each pair to their own section of the warehouse.

One person is typically responsible for actually counting the inventory in each bin location of that pair’s section. While the other marks up the count tags with relevant information.

Tags are then returned to a central inventory clerk, who will verify them and assign that pair another warehouse section to count.

7) Think about the human side

Remember that taking a physical count of inventory tends to be a gruesome task for all involved – especially if you’re taking the manual option.

Your team could be there for a while. And endlessly counting and verifying numbers over and over is an exhausting task.

So it’s crucial to think about the human side of things.

Make sure there’s ample food and drink available, and that staff get regular breaks. It could prevent a damaging counting error from happening.

8) Use a perpetual inventory system

This is where we start to venture these tips away from manual processes, and towards the digital side of things.

A perpetual inventory management system automatically updates your inventory levels in real-time. So you’d connect your physical store POS systems, online sales channels and warehouses for inventory to be updated as and when each sale is made or new stock order booked in.

Perpetual inventory system

This doesn’t totally eradicate the need for physical inventory counts and stock takes – you still need to periodically ensure that recorded and actual inventory are balanced.

But it does mean that you aren’t so heavily reliant on your physical inventory counts.

For example:

Inventory errors can easily occur at any time if using old-fashioned spreadsheets. And only checking for and rectifying them once a year via an annual inventory count leaves a huge window for these errors to be compounded over and over before you’ve even realised there’s a problem.

A perpetual system keeps inventory updated in real-time, with a periodic count then used to rectify relatively small errors 1-2 times a year.

Not convinced you need a perpetual inventory system? Take a look at 11 Signs You’ve Outgrown Your Inventory Tracker!

9) Move to cycle stock counts

Moving to cycle stock counts can be a serious game changer when it comes to warehouse efficiency.

This is where your team is assigned ‘partial’ stock takes or inventory counting tasks to complete on a regular, continuous basis. Meaning your inventory gets counted in chunks throughout the year – without the need to shut down activity for one big annual count.

For example:

Let’s say you have two warehouse workers responsible for inventory counts – Bob and Jenny. Here’s how it could work:

  • Week 1: Both Bob and Jenny are each assigned 10% of your total inventory to count during shift downtime.
  • Week 2: Bob and Jenny are assigned an additional 10% each, excluding inventory already counted.
  • Weeks 3-5: Repeats until total inventory is counted – 50% by Bob, 50% by Jenny.

So simply setting your team small, weekly counting tasks to complete can quite easily turn into your entire inventory being counted by two people every five weeks.

Of course:

The practical side of actually organising this and assigning inventory to team members can be a complicated task in itself. That’s why we suggest using an inventory system with a cycle stock taking feature.

In Veeqo, you can automatically assign weekly inventory counting tasks to your team. They’ll then be able to:

  1. See which products they’ve been assigned.
  2. Keep track of their progress.
  3. Correct any discrepancies found.

Veeqo cycle inventory count

And you/your warehouse manager will be able to keep track of everyone’s progress:

10) Count with barcode scanners

Using barcode scanners for cycle counts adds yet another layer of efficiency into your physical inventory checks.

This completely eliminates the need for tags or messy paperwork. And allows your team members to complete their weekly counting quotas quickly and accurately.

Here’s how counting with scanners typically works:

  1. Bob finds some downtime on shift and decides to complete some of his weekly counting task.
  2. He grabs a scanner, logs in and opens up the stock take section.
  3. A list of products that have been assigned to him for counting appears.
  4. Bob heads to the bin location of his first product, scans its barcode and starts counting.
  5. Any inventory discrepancies are corrected by Bob right there on the screen.
  6. He then moves on to the next product on his count list.
Veeqo Scanner inventory count

Bob can get through as many products on his count list as he likes until he’s needed back at the warehouse station he typically works at – picking, packing, etc.

The Veeqo Scanner has a dedicated stock take section that makes cycle inventory counts extremely simple:

Veeqo Scanner inventory count

Final thoughts on taking a physical count of inventory

Yes, taking a physical count of inventory is a laborious task. And one that pretty much nobody looks forward to.

But making sure your on-hand inventory is 100% correct is needed for both:

  • Customer experience reasons; and
  • end-of-year tax reasons.

Making inventory counts a crucially important component of running a retail business.

Whether going for manual processes or digital cycle counts, use the tips in this post to make it easier on you and your team.

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