Physical Inventory Counted Over a Couple Weeks

Sometimes a physical inventory can be done for all the items all at once; Perhaps over a weekend or closing the business for a day or two.  Sometimes a physical inventory will take more time and closing the business for this length of time isn’t feasible.  So you might have employees count items each day when they have time over a 2 week period.  This document explains how this could be done.  See Physical Inventory Selected by Item # & Physical Inventory Selected by Picking Sequence documents for further instructions.

There are two methods that can be utilized to perform the physical inventory procedure - by inventory item number or by picking sequence. Choose the method that best suits your needs. 

The posting of the physical inventory count doesn’t affect the G/L module inventory.  The posting of the physical count does affect the I/C module inventory value reports. When the physical inventory counts are posted a posting register is printed.  These posting registers can be used to make a manual journal entry in the General Ledger module.  Give these postings to the person in charge of the G/L module. 

How the physical inventory selection and posting works: When an item is selected for physical inventory, a flag is set on the item telling the system that the item has been selected, and the quantity on hand at the moment it is selected is recorded.  When updating the physical inventory, enter the quantity that was actually counted. The computer then calculates the difference between this number and the quantity that was in the inventory file when this item was selected.  The computer updates the current "on hand", in the warehouse by the "change" in the quantity resulting from the actual count.

Example:

·       Friday morning an item is selected for physical inventory, the flag is set & the quantity on hand in the warehouse master is recorded as 10.

·       The item is counted right after the item is selected.  The count is 9.  

·       Friday afternoon, Monday & Tuesday morning this item is sold and received just like normal.

·       The count quantity of 9 is entered & posted on Tuesday afternoon.  The system knows this is -1 from the original count of 10.  Whatever the warehouse master “on hand quantity” is when the physical count is posted is adjusted by the -1.

·       The quantity on hand is 7 on Tuesday afternoon when the physical count of 9 is posted.  The quantity on hand of 7 is adjusted by the -1 to make it 6 on hand.

·       This is why it is very important to count the items right after the item is selected.  The count can be entered & posted later, but the actual counting must be done right after the items are selected for physical inventory. 

Note:

• Be sure, before selecting items, that any open orders that have been completed are invoiced. If an item is on an open order, but the order is not invoiced (layaway, packing list, etc.) you must include the item in the count. The item does not get subtracted from the quantity on hand until the order is invoiced.
• When counting, be sure to include any items that may be in a different place--such as setting aside an item for someone, or items that are on display.
• Be sure, before selecting items, that all merchandise to be included in the physical count has been Received on the system.
• Limit the selection to a number that can be counted right NOW. This will increase the accuracy of the count, since sales may be taking place at the same time.
• Actual updating of inventory may be done at a later time with no loss of accuracy, so long as the count is done immediately when the items are selected.

STEP 1:

• Select ALL the items to be counted within the next few weeks, i.e. ALL item #’s or all the different groups of items.  This will give you all the count sheets (Physical Inventory List by Item). 
• When an employee is ready to spend time counting items, they will come to you for the count sheet (Physical Inventory List by Item).  They should only take the sheets they can count right then.
• When they take the sheet, RIGHT THEN you will go back into select for physical inventory, JUST the items they are going to count right then.  These sheets don’t need to be printed.  For instructions on selecting items for physical inventory see Physical Inventory Selected by Picking Sequence & Physical Inventory Selected by Item # .

STEP 2:

When the employee brings back the counts you will go into enter the counts just like normal.  See STEP 2 on Physical Inventory Selected by Item # & Physical Inventory Selected by Picking Sequence.

STEP 3 & STEP 4: These steps should be followed according to Physical Inventory Selected by Picking Sequence or Physical Inventory Selected by Item #.

INVENTORY MONTH END:

See the document Inventory Month End Procedures.