Physical Inventory Cycle Count

1
Physical Inventory Cycle Count

• Brent Ashcraft BYU-Idaho
• ashcraftb_at_byui.edu
• 208-496-2213

2
The following are actual signs seen across the
good ol' U.S.A.

• In the window of an Oregon store
• Why go elsewhere and be cheated when you can come
  here?
• In a New York restaurant
• Customers who consider our waitresses uncivil
  ought to see the manager.

3
The following are actual signs seen across the
good ol' U.S.A.

• In a Los Angeles dance hall
• Good clean dancing every night but Sunday.
• In the offices of a loan company
• Ask about our plans for owning your home.

4
The following are actual signs seen across the
good ol' U.S.A.

• On the wall of a Baltimore estate
• Trespassers will be prosecuted to the full extent
  of the law.Sisters of Mercy
• In a New York medical building
• Mental Health Prevention Center

5
The following are actual signs seen across the
good ol' U.S.A.

• On a display of "I love you only" Valentine
  cards
• Now available in multi-packs.
• In a Maine restaurant
• Open 7 days a week and weekends.

6
Topics of Discussion

• Why Cycle Counts?
• Specifics of How we Count
• Other Related Accounting Procedures
• Group Sharing of Ideas

7
Why Cycle Counts?

• Confidence in system stock-on-hand numbers
• Identify Shrink Sooner
• Discover Problems in Processes

8
Confidence in Numbers

• Schedule counts throughout the year
• Allow buyers to request counts
• Show reports of results to buyers before
  finalizing

9
Identify Shrink Sooner

• Post shrink 2 to 5 times a year can see trends
• Count high shrink potential items quarterly
  (technology)
• Discover areas vulnerable to shrink
• Discourage employee theft

10
Discover Problems in Processes

• Tagging Errors
• Erroneous changes in stock on hand quantities
  DEI-STN or STS
• Bar codes assigned to wrong SKU
• Receiving errors or miscounts
• Pricing errors

11
How we Cycle Count

• Assign responsibility to AP
• Outline a schedule for the year
• Use a procedure checklist
• Do weekly counts
• Keep reports

12
Assign responsibility to AP

• Accounts Payable Clerks do cycle counts after
  processing daily invoices
• Two or more class codes can be counted in an
  afternoon
• They follow schedule for the month
• Accept requests from Buyers

13
Outline schedule for year

• Review all class codes for need
• Determine how often to count based on value and
  quantity of inventory
• Create a spreadsheet to track progress

14
Use a procedure checklist

• Create a procedure checklist for AP clerks
• Checklist ensures that steps are not missed
• Easy to train someone because they can follow the
  checklist

15
Do Weekly Counts

• Most weeks except for Rush and Buyback
• Shooting for 5 to 15 class codes per week

16
Keep Reports

• Reports showing differences between count and
  system on-hand
• Shrink reports

17
Cycle Count Process Step by Step

• Identify class(es) to count
• Notify buyer and receiving department
• Create PI session
• Freeze stock on hand
• Count using wireless Symbol scanners
• Post count and run differences report

18
Cycle Count Process Step by Step cont.

• Review count-to-freeze differences report to see
  what items need verified
• Research unreasonable differences using
  additional system reports if necessary
• Enter corrections using handheld or through PI
  menu option
• Post corrections
• Rerun count-to-freeze differences report

19
Cycle Count Process Step by Step cont.

• Review final results with buyer
• When confident the count is correct, run final
  process which adjusts all uncounted skus to zero.
• Delete the PI session
• Enter shrink into stock ledger (INV-21-06)
• Update spreadsheet tracking record with count
  date and shrink amount

20
Group Sharing of Ideas

• Suggestions for improving Cycle Counting?
• Is it feasible for all stores?
• Do the benefits outweigh the costs?
• Can cycle counting replace annual physical
  inventories?

21
Other Related Accounting Procedures

• Annual Physical Inventory
• Stock Ledger Reconciliation
• Daily review of stock changes, transfers, and
  price changes
• Receiving and Shipping Controls
• Discrepancy reporting
• Accounts Payable processing of discrepancies
• History Processing (Purging files)

22
Textbook Loyalty Program

• POS tracks textbooks by customer
• Link in CO.CF file
• Does not allow return unless in CO.CF as a sale
• Cannot sell to store until last day of buyback
  (we pay 60)
• Buys back for store at 40 on the last day of
  buyback

23
Physical Inventory Cycle Count

• Brent Ashcraft BYU-Idaho
• ashcraftb_at_byui.edu
• 208-496-2213