Physical Inventory - How Often is Enough?

A number of my clients often ask if they should do a physical inventory more than once a year in order to cut down there shrink. As a general rule, there is usually no payback in doing inventory more than once a year unless need to for financing purposes or for a potential buyer of the business.

The cost of doing inventory usually outweighs the amount of inventory shrink that can be saved. However, it is recommended that monthly cycle counts be done on high volume items. This means selecting a handful of items (3-5) and having the stores do a count on those items only. This information is then used to verify against your perpetual computer inventory. Usually different items are selected each month so that 40-50 items are counted by the end of each year. However, if you have a problem item then you may choose to have that same one counted each and every month.