How do I check a warehouse’s inventory cycle count records?
Request the cycle count schedule and several sets of completed count sheets. Look at how often each zone is counted, how variances are explained and who approves adjustments. Then pick a few items and count them yourself against the system.
Cycle counts are how a warehouse proves its records match its shelves. Ask for the schedule first: which zones or clients are counted, how often and by whom. A plan that exists on paper but is rarely followed is a warning sign.
Next, read the completed sheets. Look at the size and direction of variances, the reasons recorded and what happened after each one. Many shortages that the team writes off as miscounts may point to damage, theft or poor receiving. Check who is allowed to adjust the system, and whether anyone reviews those adjustments.
Do your own spot check. Choose items from the system and find them on the shelves, then pick items from the shelves and find them in the system. Do it with the seller’s permission and a staff member watching. If the warehouse stores client goods, ask clients how they view the counts. Your accountant can explain how inventory differences might show up in the financial statements. Ask also how often counts uncover items that belong to a different client, because mix-ups like that point to receiving and put-away habits more than to counting itself. Ask how long it takes to resolve a variance, since slow resolution leaves errors in the books longer.
Key takeaways
- Compare the written count plan with the sheets actually completed.
- Study variance reasons and who approves adjustments to the system.
- Run your own spot check in both directions, shelf to system and system to shelf.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat is inventory
- 02Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
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