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Inventory Cycle Counting 101 Best Practices and Benefits

Cycle counting is a critical component of inventory management in every business but has become increasingly so in recent years. Cycle counts are an effective method of detecting shrinkage and avoiding revenue loss. Inventory is without a doubt the most controllable expense in retail. It comprises spreading out the time required to conduct inventory throughout a year rather than doing so all at once. The firm determines how often it intends to inventory particular product categories per year. Then staff counts a few things every day until all cycle counts are accomplished. It provides the company with a more complete and accurate picture of the contents of its warehouse.

While it can be a tedious task, the NetSuite Inventory Counting tool can come in with many benefits for the staff and the business. 

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What is Inventory Cycle Counting?

Inventory counts are critical for tracking commodities and resources accurately in your warehouse and stockroom. Cycle counting is a method of inventory management that lets you count products in a specific section of a warehouse without interfering with routine operations.

Physical Counting vs Inventory Cycle

Physically counting and comparing your inventory to what your inventory software or spreadsheets say can assist you in spotting product loss and theft. The issue is that performing actual inventory counts may be a significant undertaking, even for a small business. It is not always feasible to shut down and count everything regularly, so many businesses conduct physical inventory only once a year. Conducting a physical inventory is a prudent course of action for businesses with limited inventory. Schedule and conduct a yearly inventory if you can count your stock without closing the store or inconveniencing clients.

What if there was a more efficient way to physically count the inventory that enabled you to do it more regularly and with a higher degree of accuracy? Inventory cycle counts are an effective substitute for maintaining a big physical inventory. The inventory cycle count separates the task into manageable chunks rather than counting everything in your warehouse all at once.

Consequently, there is no correct or incorrect response here. Physical inventories are a reasonable option if you have the time and resources. On the other hand, cycle counting provides more frequent counts with more accurate data and insights.

Types of Cycle Counting

Control Group Cycle Counting

As the name implies, control group cycle counting is based on creating a control group and then using the data to extend to larger groups. Businesses count the same things several times in a short period. It is utilised to discover flaws with the counting techniques and improve the counting process before applying it to a broader pool of objects. This strategy is useful for firms that are inexperienced with cycle counting. It enables you to practise cycle counting and improve your accuracy over time until it is sufficient for use on a large scale.

Random Sample Cycle Counting

This method lets you choose how many items to count during each cycle count. As a result, your warehouse will experience less disruption, and the random sample cycle counting can occur during normal business hours. Random sample counting has two methods: counting the same number of people as before and counting a smaller number of people. In constant population counting, when you do the same thing repeatedly, you always count the same number of things. In inventory management, objects are counted and then removed from the next count until all inventory items have been counted. That is followed by a repetition of the process. Both of these methods are acceptable for selecting a random sample. All that remains is to select the best one for your warehouse.

ABC Cycle Counting

ABC cycle counting is based on the Pareto principle, most commonly referred to as the “80/20 rule.” According to this theory, 80% of your results come from 20% of your products. By classifying products as A, B, or C, you may narrow your emphasis on the products responsible for most of your findings.


Each organisation should develop its own best practices for cycle counting. A warehouse map or a mix of location, value, and throughput may decide their hybrid approach. Before any changes are made, Pareto analysis is used to start most hybrid schemes.

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How to Carry Out Cycle Counting?

Businesses undertake inventory cycle counting intending to eradicate the root causes of errors. As a result of this action, dependable control processes are created. After conducting a full physical inventory and resolving any stock abnormalities, the corporation initiates a regular counting programme for maintenance.

Examine the Documents

To begin, you should create an accurate database. Begin the process by verifying and revising the data entry for all inventory transactions.

Print or Submit a Cycle Count Report

Prepare a report detailing the cycle count. Save the report to your mobile device if you’re counting on it.

Commence Counting

Counters should verify the inventory locations, descriptions, and quantities specified in the report against what is physically on the shelf.

Investigate and Reconcile

Identify and resolve any problems with stock management discovered during the count. Look for patterns of errors.

Changes Should Be Made to Procedures

Implement any inventory counting policies or methods that are necessary.

Modifications to Records

Modify the database of inventory records to reflect what is currently on the shelf.

Calculate Repeatedly

Inventory should be audited routinely, and the proportion of inventory should be appropriately estimated.

Inventory Cycle Benefits

The primary benefit of stocktaking is that it allows you to compare what you have on hand to what your stock count or inventory management software suggests you should have. Inconsistencies between your physical inventory and the inventory you manage on a spreadsheet or with software may be caused by human mistakes, theft, or other circumstances.


Periodic cycle counts guarantee that all of your inventory is counted at least once a year. It is an excellent way to improve the accuracy and dependability of your annual reporting. A far more accurate stock position enables more precise and frequent decision making, regular and improved comparisons to projections, and a decreased risk of stock-outs, over-stocking, and redundancy write-offs.


Maintaining correct and updated cycle count inventory affects more than just warehouse staff; it influences most of your company’s functions. Accounting, for example, maintains accurate inventory valuation information and is capable of generating accurate financial reports promptly at any time. Warehouse staff can maintain optimal inventory levels successfully, avoiding stock-outs. Additionally, they can handle reorders, shipping, receiving, and storage.

Great Customer Service

Cycle Count insights eventually serve your consumers by supporting you in more successfully managing your stock – not only how much of it you have, but also where it is housed and in what proportion to other stock items. This, in turn, ensures that you are more focused on lead times, production priorities, and on completing projects on time.

Always Open

Businesses that wait until the end of the year to take inventory frequently have to close their doors for one or more days while workers count inventory, thereby losing money and business. On the other hand, cycle counting is handled exclusively by warehouse workers who are well-versed in this often-used method. It takes place during regular business hours, guaranteeing that you never have to shut your doors to count your inventory.

Effective Decision Making

Cycle Count data may also be used to inform choices on inventory, production, and distribution. Every business wants to reduce costs, and inventory accounts for a sizable portion of capital. A popular technique for boosting customer service and recouping lost income is to guarantee that the organisation has more “coverage,” i.e., more inventory in warehouses and work in progress in the factory. It has a deleterious effect on cash flow and may result in the demise of a business.

Less Time and Money

Planned cycle counts may save you a lot of time, money, and frustration. Each department inside your organisation will profit, and customer satisfaction levels will soar.

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Best Practices

Regardless of your method to inventory counts, below are some recommended practises to follow:

  • Only one category is counted per month

It enables you to visit each place multiple times every year. Additionally, it aids in maintaining focus. And, to be quite candid, it is the volume of inventory that can be handled during this type of count. Cycle counts should never be used to determine when a business should be closed. In other words, you should be able to complete the count within a few hours of the office closing during normal business hours.

  • Employees should be informed of the outcome

Even if you are not obligated to share all financial facts with your staff, they should be aware of their performance and be notified if a loss occurs. Often, the employee is the one who can aid you in repairing the leak and preventing inventory shrinkage. When it came to inventory issues, we can recall numerous situations where an employee, rather than myself, solved the puzzle.

  • Utilise zero counts
  • Determine which items are moving the fastest in the warehouse. To determine how to classify objects for future counts, rank them according to their speed.
  • Counting teams should have their employees.
  • Make sure that teams count all products at least once a quarter.
  • First, you may wish to double-check the counts to ensure they are accurate. A supervisor can compare the counts to the system’s inventory.

NetSuite Inventory Cycle Counting

NetSuite’s Inventory Counting tool automates inventory management and offers you more control over critical assets. Firms may use this feature to categorise inventory according to transaction volume or value and keep track of on-hand item quantities regularly to maintain inventory correctness. NetSuite’s primary functionality not only aids in improving inventory control but also extends those operations to its warehouse management solution and mobile radio frequency (RF) devices. Users may scan bins and other objects using the mobile app, automatically gathering cycle counts without leaving the floor. It minimises disruption to daily operations and reduces human errors caused by incorrect keying and lag time.

Final Thoughts

Though optimized inventory management is one of the easiest ways to boost revenue, many firms focus elsewhere. It is a mistake. Cycle counts are an alternate technique of inventory management that may be conducted often, with a small workforce, without disrupting operations and resulting in revenue loss. Apart from that, the different techniques for doing cycle counts provide your business with flexibility. Please choose the one that works best for you and tweak it as necessary. Whichever cycle counting technique you choose, you will acquire more frequent and exact inventory counts. NetSuite Inventory Counting speeds the process of inventory counting while also providing various extra benefits. Get in touch with Folio3, Certified NetSuite Alliance partners and enjoy the numerous benefits of a customized NetSuite that meets your business needs.

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