Cycle counting: how to count stock without closing the shop

What is cycle counting?

Cycle counting means counting a small part of your stock on a regular schedule instead of everything on one day. Each week or each day, staff count a planned group of items or shelves and compare the result with the system. Over a few months every item has been counted, the busiest ones many times.

The shop stays open, the count takes minutes rather than a night, and differences are found while people still remember what happened. A difference found three weeks after it happened can often be explained; one found eleven months later usually cannot.

Why do stock figures drift away from the shelf?

Stock figures drift because every movement depends on someone recording it correctly. Goods received but not booked, sales scanned under the wrong item, returns put back without a record, damaged items thrown away and simple theft all move the shelf away from the system. Each one is small; together they decide what you reorder.

• Receiving: a delivery counted roughly, or booked against the wrong purchase order.
• Selling: a similar item scanned instead of the one sold, or a quantity typed wrongly.
• Returns and exchanges: items back on the shelf without being recorded.
• Damage and expiry: items written off in practice but not in the system.
• Transfers: stock moved between branches without the transfer being recorded.

How often should each item be counted?

Rank your items by their value of sales or the value of stock held, then count the top group most often. A common pattern is to count the top tenth or so of items every month, the middle group every quarter and the rest twice a year. Add any item that shows a problem, such as a negative quantity or a customer finding an empty shelf.

These frequencies are a starting point, not a rule. If one group keeps showing differences, count it more often until you find the cause.

How do you run a cycle count, step by step?

Plan the list in advance, count when the area is quiet, and count blind: the counter writes down what is on the shelf without seeing the system quantity. Then compare, recount any difference with a second person, look for the cause and only then post the adjustment with a reason.

1. Choose today's items or shelves from the schedule, and print or open the count list without system quantities.
2. Pick a quiet time, and make sure deliveries and transfers for those items are recorded first.
3. Count every location where the items are kept: shelf, back store, display and returns area.
4. Record the counted quantities, with the batch or serial number where you track them.
5. Compare the counts with the system and list every difference.
6. Recount each difference with a second person before accepting it.
7. Look for the cause: unbooked receipts, sales of a similar item, returns, damage or transfers.
8. Post the adjustment with its reason, and fix the process that caused it.

What should you do with the differences?

Treat each confirmed difference as a question, not just a correction. Check recent receipts, sales and returns of the item and of similar items first, because many differences are two errors that cancel out across items. What remains is real loss or gain, and it should be posted to stock with a reason so its value reaches your accounts.

Keep a simple log of differences by item, reason and value. After a few months it shows you where the problems are: one supplier whose deliveries are short, one till where similar items are confused, or one area where damage is not recorded. Fixing those causes is worth more than the counting itself.

Do you still need a full count at year end?

The Commercial Books Law requires a trader to record in the inventory book the details of the goods held at the end of the financial year, or a total supported by separate lists. Regular cycle counts make that year-end figure reliable, and your accountant can tell you how much of a full count is still needed for your business.

The same law requires the journal, the inventory book and the general ledger to be kept in Arabic and in good order, and the books, correspondence and documents to be kept for at least ten years. A trader whose capital does not exceed SAR 100,000 is exempt from keeping these books.

How do you keep counts quick in a busy shop?

Keep each count small enough to finish in fifteen or twenty minutes, before opening or in a quiet hour. Scan barcodes instead of reading labels, keep each item in as few places as possible, and make one person responsible for the schedule so that counts happen every week, not only when there is time.

• Count by shelf or by supplier, whichever matches how the stock is laid out.
• Never count an item while a delivery of it is being unpacked.
• Rotate the people who count, and keep counting separate from receiving where you can.

How DynamoOS helps

Dynamo Inventory shows stock by warehouse and branch, updated with every movement, and each movement is tied to the order or delivery behind it. Barcodes, batches and serial numbers are scanned in and out. Dynamo Point of Sale sells from the same stock, returns go back into it, and stock is valued as it moves, so adjustments reach your accounts.