Retail Store

A Retailer's Guide to Cycle Counts: Best Practices for 2024

Jul 30, 2024 • 5 min read

When your physical inventory doesn’t match your inventory records, three things suffer: your customers, your staff, and your bottom line.

What’s the solution? Cycle counts.

Using inventory cycle counts to manage inventory will save you time, improve inventory accuracy, cause minimal business disruption, and keep your customers satisfied.

In this blog, we’ll explain how to use cycle counts in inventory management and share best practices your retail store can implement this year.

What Are Cycle Counts in Inventory Management?

Cycle counts are used to confirm your full physical inventory count matches your inventory records, making adjustments as needed. However, instead of counting your entire inventory at once, you work through sections of it at a time. Conducting cycle counts will help prevent stockouts and theft, as well as maintain low inventory holding costs.

For example, on Monday, your staff counts cookies. On Tuesday, they count chips. Alternatively, they could count by category, such as snacks, dairy, or drinks.

Cycle counts will help identify discrepancies between actual and recorded inventory levels, ensuring you always have products that are in demand rather than dead stock.

With this in mind, let’s dive into the details of cycle counting and how you can use it to improve inventory management in your store.

Cycle Counting Advantages for Retailers

The goal of cycle counting is for you and your employees to break up what is counted each time and combine those totals to get a good idea of what physical inventory is actually like in your store on a regular basis.

Doing this process in cycles means you don’t need to do an annual count since you’ll be taking inventory throughout the year. Cycle counts also ensure your workload is spread out rather than concentrated at one time during the year.

Other benefits of cycle counting:

Less disruptive than full inventory counts: There are fewer items to count and sort through at one time, and the rest of your staff is unbothered within the warehouse.
Accurate stock count: You’ll always know exactly how much product you have on hand.
Inventory control: By identifying product discrepancies and potential issues, you can enact corrective measures to prevent future mistakes.
Trend detection: Cycle counting allows you to see differences between periods of the year and may illuminate trends in sales you otherwise missed.
Theft detection: Regular counting ensures theft is detected and countermeasures can be implemented.
Customer satisfaction: Remember, it’s all about pleasing the customer! When you have what they need, guaranteed, they’ll leave satisfied.

Cycle Count Implementation

Implementing a cycle count process starts with determining count frequency. This metric may differ for each product, especially when considering sales velocity or inventory turnover rates. From here, divide your inventory into smaller, manageable cycle counts to ensure comprehensive coverage over time.

Other important steps as you begin:

Review your records to ensure you start with an accurate database.
Create a cycle count report.
Begin counting! Ask your staff to review inventory locations, descriptions, and quantities to ensure they match what’s physically in your warehouse.
Identify and correct discrepancies found during the count. Be on the lookout for error patterns.
Adjust your process by implementing any inventory counting policies or procedures as needed.
Reconcile records by making changes in your inventory database that mirror your shelves.
Repeat as needed. Audit your inventory on whatever frequency works best for you and calculate the inventory accuracy percentage using this formula:
(counted items / items on record) x 100

For an easier way to schedule, execute, and track cycle counts efficiently, consider investing in a point of sale (POS) system that seamlessly integrates with inventory management. With POS Nation, you can know what's in stock, manage purchase orders, receive reorder points to replenish low or out-of-stock inventory, and streamline inventory counts with a handheld device.

Best Practices for Conducting Cycle Counts

How can you get started conducting cycle counts for your retail store? Let’s take a look at some best practices you can implement.

Conduct inventory reconciliation: When you count all physical inventory on hand and compare the total to what’s showing in your inventory management system you’ll be able to identify any discrepancies and find out why your counts don’t align with what your system says is in stock.
Embrace automation: Leverage RFID technology, barcode scanners, and automated data collection systems to streamline the cycle counting process and reduce human error.
Implement ABC analysis: Prioritize items based on their value and frequency of movement to optimize resource allocation during cycle counts.
Use cross-functional collaboration: Involve various departments, such as operations, sales, and finance, in the cycle counting process to ensure comprehensive coverage and accountability.
Continuous improvement: Regularly review and refine cycle count procedures based on feedback, data analysis, and industry best practices.

Using these best practices can set you up for success in keeping track of and reconciling your inventory, giving you the information you need to run your store more efficiently.

How To Overcome Cycle Count Challenges

Implementing a new inventory process can be seen as a burden to your staff, but when you explain the importance of accurate counts and the benefits of cycle counting (the big one being it’s less of a strain on them), you’re sure to get buy-in. It’s important to answer all their questions and even offer the opportunity to make suggestions.

Train your employees: Your staff should understand proper cycle counting techniques and know how to use the equipment. Explain that adherence to standard procedures will ensure accurate inventory.
Process for reconciliation: Explain strategies for addressing discrepancies between physical counts and inventory records, such as investigating root causes and implementing corrective actions.
Resource allocation: Optimize staffing levels and allocate resources effectively to minimize disruptions to daily operations during cycle counts. Make sure each employee knows what is expected of them during cycle counts.
Using the right tool: The right technology will make your team’s lives easier. To reduce human error, POS Nation’s inventory management software integrates with mobile handheld devices to scan your items. Once synced back to the POS, the system will generate a discrepancy report to help you identify product counts that don't match. You’ll also enjoy:

Sales tracking
Customer management
Automated reporting
Seamless integration with physical and perpetual data
Cloud-based POS you can access anywhere

Using these processes and tools, you should be able to overcome any challenge your cycle counts throw your way.

Implementing Cycle Counts in Your Retail Store: We’re Here To Help

When your inventory records don’t match what’s on the shelves, it’s frustrating for you and your customers.

By implementing regular cycle counts, you can be sure that both your physical inventory and records align. Plus, continuously counting smaller portions of your inventory throughout the year puts less strain on your staff.

Implementing a cycle count process to manage inventory will save you time, improve inventory accuracy, cause minimal business disruption, and keep your customers satisfied. And when you automate the bulk of it with POS Nation, you reduce human error, streamline the inventory process, and make better business decisions.

Schedule a demo today to learn more about using POS Nation in your retail store.

Table of Contents

Table of Contents

A Retailer's Guide to Cycle Counts: Best Practices for 2024