Year-end inventory counting is a crucial annual practice for businesses. A well-executed year-end inventory counting process can ensure accuracy in inventory records, aid in strategic decision-making for procurement and distribution, and ensure accurate financial reporting.

To optimize the year-end inventory process, business should follow a series of key steps, which comprises essential procedures to be followed in the pre-count, the physical count, and post-count stages.

Pre-count Steps – Preparation

▪ Planning

Plan and establish a timeline, and ensure staff are trained for accurate inventory counting.

▪ Documentation Review

Ensure that all relevant records such as purchases, sales, sales returns, and adjustments are accurately recorded up to the counting date.

▪ Categorization and Organization

Ensure that similar items are physically located together within the warehouse.

▪ Allocation of Count Areas

Divide warehouse areas into manageable sections, which can then be assigned to different counting teams.

Count Steps – Physical count

▪ Final Briefing

To start the physical counting process, counting teams should be briefed, reminding them of the procedures to follow.

▪ Counting Sheets

Provide count teams with pre-numbered count sheets to prevent misplacement and include crucial details like item descriptions and locations.

▪ Labelling items

A label such as a sticker must be placed near items to indicate items already counted.

Post-count Steps

▪ Review, Investigate and Update

After the inventory count, cross-check physical count with system quantity, recounting items with significant discrepancies, and adjust records accordingly.

In this guide, we explore critical steps and best practices to be followed by businesses in performing their year-end inventory counts, and the role of the external auditors in the year-end inventory counts.