Have you ever found your company in a position where you have too much of one inventory item and not enough of another? Or found your company in a position where you could not fill a parts or sale request? Or had to halt your company’s production due to a lack of inventory? If you have, a cycle count of inventory might be a process to consider.
Cycle counting inventory is a management technique where a small amount of inventory is counted periodically over a fiscal year. This technique eliminates the need to physically count every inventory item at year end. For a manufacturing company, some of the benefits of cycle counting include:
- Eliminates the need to count all inventory items at year end, resulting in less down-time for staff and operations.
- Enables a company to maintain a more accurate inventory balance in the general ledger year round.
- Provides valuable data which allows management more opportunities to review inventory levels to minimize scrap and eliminate over/under stocking.
- Enables a company to have better internal controls over inventory.
- Supplies data so the company can review their cost to purchase inventory to achieve better rates.
- Allows a company to catch inventory related errors sooner.
These are just a few examples of how a cycle count inventory management process could benefit your company. As such, a full inventory count at year end might not be the best process for your company and cycle counting could be something to consider transitioning to.
Contact a MKS&H professional to get valuable help on how to implement and start this process at your company.
Article contributed by Megan Baker, CPA, MKS&H Manager
About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by advising them regarding their financial, technology and human capital management needs.
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