What is Cycle Count?
A cycle count is an auditing process through which we can check the accuracy of our inventory records such as (subset of inventory, in a specific location etc) by counting items physically on the shelves of the warehouse on any specific day.
Now you can save yourself some trouble when it comes to counting your warehouse or your inventory by checking periodically indifferent sections throughout the warehouse. But we are going to use an example for counting everything all at once and going through all of our stock, our inventory. A lot of the companies follow this procedure towards the end of the financial year.
Objective of Cycle Count
following are the three objectives of Cycle Count:
Accuracy: During this cycle count we process want to be accurate, going through our maze like warehouse.
Efficient: Along with accuracy we also want to be efficient and not hopping around from place to place. So we obviously need a process of our own in going through all of this and hopefully we can also establish what is known as the ABCs.
ABC: ABCs are kind of categories of the products, the materials that you use the most, A being the product that you rely on most that should be on hand ready to be used, whereas B and C not as much. Especially C, which is the one you don’t have to count as often. We don’t need to go into specifics but ideally it would be better to know exactly what that is so that we have accurate information.
You can’t make good business decisions without good and accurate information. And the results should also be effective, in terms of telling you that yes you are on point with how much material you have on hand, that it is accurate, and ideally it is that you establish your ABCs Now if you are going through a manual process then establishing ABCs can be more difficult because you really have to go through your books, there’s little human error involved.
Whereas if we have an automated process through software like an inventory management software, we can know outright what ABCs are so we can have enough products in our warehouse to serve our needs all time, to make sure we have enough coming in coming out and also that we are not losing or wasting money on inventory that is just sitting there taking up space, taking up our cash flow.
So when it comes to cycle count, remember we need to be accurate so that we can make proper information for making decisions, we need to be efficient in going through our inventory and accounting so that it can be effective in telling us where we should order less or we have too much, maybe we are not keeping accurate count. But ideally we need to establish our ABCs so that we can know what material, what good is serving us the best way possible without getting tied up in losing our cash flow.