Blogpost
Inventory counting is the foundation of inventory management in ecommerce. It’s more than just tax accounting – it’s making sure you have the right products at the right time and avoiding excess inventory or stockouts.
As the year winds down or begins, businesses need to focus on speed and accuracy during their physical counts. This affects everything from financials to customer satisfaction to operational efficiency.
Here we’ll cover the top tips and show how modern tools, like cloud-based inventory management systems, can change your year-end inventory counting process.
Inventory valuation affects your balance sheet and financial KPIs, including net income. With accurate inventory records you can calculate cost of goods sold (COGS), plan for the next period and forecast demand.
Regular inventory counts will help you identify inventory shrinkage caused by theft, damage or mismanagement. This gives you a more accurate view of what’s left in your business.
Having the right stock levels means no stockouts so customers can buy what they need when they need it. Sellable inventory means higher customer satisfaction and repeat business.
For e-commerce businesses the ending inventory value is a key component of year end financials. An accurate year end inventory count means compliance with tax laws and no surprises during audits.
Having a schedule for cycle counts is key. Counting quarterly, semi-annually or annually means your inventory records stay up to date and year end counts are less painful.
A checklist will make sure nothing is missed during the physical count. Categorize items by location, type or valuation method (FIFO, LIFO or weighted average cost).
Reconcile physical counts with your inventory management software or e-commerce platforms like Shopify, WooCommerce or Magento. This will help you detect discrepancies and ensure accurate financials.
Trained staff can handle inventory more efficiently, accurately and with care. Invest in training on inventory apps, barcode scanners and inventory cycle count processes to minimize human error.
Scheduling inventory tasks during downtime means no disruption to warehouse operations. This is especially important during peak periods like Black Friday or Christmas when warehouses are handling more net sales and products.
Barcode scanning eliminates manual errors and speeds up stock counts. It also makes tracking raw materials, finished goods and everything in between easier.
Divide your warehouse into count zones for easier management and faster counting. Assign zones to team members for accountability.
Modern inventory software like PULPO WMS automates tedious manual tasks, provides real-time tracking and makes year end physical inventory easier and more accurate.
Time Consuming Processes
Physical inventory counting can take days or even weeks depending on the size of your warehouse and complexity of your business.
Human Error
Manual counting means more human error and inaccurate closing inventory during the actual physical count, inventory valuation and COGS.
Overstock or Stockout Issues
Without accurate records you may end up with too much inventory or stockouts, both of which can harm profitability.
Compliance Risks
Not calculating accurate ending inventory value can result to discrepancies in your financials and issues during audits or tax reporting.
1. Real-Time Inventory Tracking
Cloud-based systems like PULPO WMS gives you real-time stock levels so you can track new inventory, manage raw materials and total value of goods.
2. Automation
Automate cycle counts, replenishment and inventory valuation with WMS tools. By reducing manual work you free up staff to focus on more important tasks.
3. Faster and More Accurate Counting
Barcode scanning and automated task creation makes physical counting faster and less error prone. For example PULPO WMS allows batch counting based on location or product type.
4. Better Reporting and Compliance
Generate reports on your business inventory including average cost, remaining inventory and discrepancies. This ensures tax and financial compliance.
5. Multi Warehouse Management
If you have multiple warehouses, a WMS simplifies inventory tasks by centralizing data and automating processes.
Batch Counting
Create tasks to count multiple items in one batch based on location or product type. Perfect for large warehouses.
Real-Time Updates
Always see your inventory organized by category, zone or product type.
More Accurate
Reduce inventory tracking errors with automated processes for a balanced and accurate balance sheet for reporting and decision making.
Compliance Made Easy
Track and document the last time each inventory position was counted so you’re compliant during audits.
Staff Optimization
Reduce the number of staff required for physical inventory counting, lower labor costs and increase efficiency.
Overstock and Stockout
With real-time updates you always have the right amount of sellable inventory.
Reducing Shrinkage
Automated tracking reduces errors and theft, minimizes inventory shrinkage.
Better Cost Management
A WMS simplifies inventory valuation processes so you can calculate average cost or weighted average cost of goods more accurately.
More Efficient
With automated counting and tracking businesses can do year end counts in a fraction of the time, lower labor costs and be more operational.
Inventory counting is a must for ecommerce businesses especially during year end or year start. By following best practices and using a modern inventory management system companies can reduce costs, save time and be more accurate in their inventory records. A solution like PULPO WMS makes physical inventory count easy and offers advanced tools for tracking, reporting and decision making.
Don’t wait—get a WMS to simplify your year end inventory count, be compliant and set your business up for the next year.
A year end inventory count ensures you have accurate inventory tracking for your business, to avoid differences between physical stock and inventory records. It’s required for financial reporting, planning for next year and to meet customer demand.
Accurate counting provides financial reporting data, so you have a clear picture of your cost of goods sold (COGS). It also impacts your bottom line by allowing you to value inventory, reduce shrinkage and optimize stock levels.
Inventory valuation is key to knowing the total cost of your stock and how it affects your financials. It ensures your inventory is reflected in reports so you can make strategic decisions for the year like pricing, restocking and forecasting customer demand.
While a year end inventory count is required at the end of the fiscal year, it’s recommended to do periodic counts—quarterly or biannually—to ensure your inventory is aligned with your business goals and changing customer demand. Regular counts also reduce errors during year end reporting.
Yes, modern inventory management systems simplify inventory valuation by automating calculations and giving you real-time inventory updates for your business. They also simplify financial reporting so you can manage inventory for the year while keeping costs low and meeting customer demand.
Inventory Valuation Methods
1. First In, First Out (FIFO): Assumes the oldest inventory is sold first. Useful in times of rising prices as it uses older, lower costs for cost of goods sold (COGS), potentially increasing net income.
2. Last In, First Out (LIFO): Assumes the newest inventory is sold first. Beneficial for reducing taxable income during inflation by using the latest, higher costs for COGS.
3. Weighted Average Cost (WAC): Averages the cost of all available inventory items during the period. This method smooths out price fluctuations and provides a consistent cost basis.
These methods are essential for determining the cost of goods sold and the ending inventory value, impacting financial reporting and tax obligations.
A warehouse management system is software that helps organizations manage inventory, orders, and logistics in their warehouse operations.
