By Graham Hoffman on February 23, 2021

3 Best Inventory Counting Methods for Small Businesses

The success of your small business requires an investment in results-driven processes. Unfortunately, many companies invest in inaccurate inventory counting methods. Keeping a close eye on the stock you have on paper vs. what's in store enables you to maintain inventory accuracy and spot causes of inventory shrinkage.

In most cases, inaccurate counting methods are particularly risky for small businesses. In this scenario, an inaccurate stock count means issues of theft can thrive. You can (and should) count inventory monthly or even daily, depending on the unique needs of your business.

But what methods of counting inventory are the best for your small business?

Check out the article below for advice on three of the most common inventory counting methods and figure out which way works best for you. 

What are the Best Inventory Counting Methods for Small Businesses?

None of your employees want to track your entire inventory through pen and paper. A POS system that’s built to serve your needs can do a lot of the inventory work for you. Good POS systems can keep track of what your inventory should be, letting physical counts be a way to catch discrepancies simply. 

With that in mind, here are the best inventory counting methods for small businesses.

1. Cycle Counting 

Your business can use one method to count inventory by doing what is called “cycle counting.” This method makes sure you do not count your inventory entirely in one go, but rather, you cycle through which part of your inventory you’re reviewing at a time. 

One day you would have employees count a specific section of a store, maybe your potato chip aisle. The next day, the soda section would be counted. Alternatively, you could do counts by product grouping, such as items of a particular brand or by specific areas of your store’s floor plan. 

Regardless, at its core, the goal is for you and your employees to break up what is counted at each time and combine those totals at the end to get a good idea of what physical inventory is actually like in your store. 

This means you don’t need to do an annual count since you’re always taking note of stock throughout the year in smaller, easier-to-manage pieces. You’re also able to make sure your workload is spread out throughout the year rather than on your employees’ shoulders for just one specific weekend. 

Another advantage is that you’re able to plan your inventory process easier as less inventory work needs to be done per check, which means less for you to record and sort through at a time. 

Speaking of analyzing, cycle counting lets you see differences between periods of the year and might show you trends in sales you otherwise may have missed. For example, you might notice you sell more of a particular soft drink right before the Super Bowl and sell out. Next year, you can plan to have more inventory to prevent that issue. 

2. Infrequent Counting

Another method your business could use to keep track of inventory is to complete an infrequent count. This method is usually unplanned and is often the response of your employees tackling a stock emergency. 

What is a stock emergency? Say that you notice your grocery store is out of lettuce, one of your most popular vegetables. Your employee points it out, and you realize you have only one head left in the back. This checking and realizing only one is left in the back of your store is an example of infrequent counting. 

Retail POS System Buyers Guide

Since this method is usually used to address a specific issue, it likely won’t be the only method of inventory counting you rely on unless you have stock that doesn’t need replacing until it’s noticeably low. 

This method does have a lot of advantages for you to consider using when needed. It is so flexible that your employees can complete these counts on their own when they notice something is wrong or when you, as their supervisor, notice something’s gone awry. This flexibility means you can get accurate information in the face of severe stock issues. 

3. Tag Counting

One final way you can keep track of your store inventory is by using physical tags on each item. While counting these tags, you have to fill out the item ID, counted quality, and other relevant information onto the tag’s designated spaces. Sometimes there’ll be a second tag to let another employee validate the information. 

This method can be time-consuming and complicated since it doesn’t allow you to compare against your POS system data. However, it might be beneficial for you to use if you think there are errors in your physical counting.

Get Help Choosing the Best POS System for You

We know that POS systems are most useful for small businesses that sell products. However, POS systems that track inventory automatically are especially useful in businesses that want to track products within the production process. 

These POS systems are a useful tool in the world of businesses that engage in inventory management. Inventory is a business’ most expensive asset that it can hold. 

A business should not hold on to inventory too long or it will become obsolete or even expired. When this happens, the inventory will need to be damaged out and thrown away. 

If they don't have enough inventory on hand, they are in danger of stocking out and damaging customer goodwill. 

Wanting to look for a POS system that lets you compare sold inventory against a physical count? Check out our POS System Buyers’ Guide for some of the things you should keep in mind when seeking the system that’s right for you. 

Retail POS System Buyers Guide

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