inventory management

How to Cycle Count your Inventory (and avoid the dreaded EOY count!)

Cycle counting is a way of stocktaking regularly through the year. We show you how to implement this inventory stocktaking technique into your small business.

The big, end-of-year stocktake fills most small businesses with dread and anxiety - using cycle counting techniques, we show you how to make this task faster and more accurate.

What is a stocktake?

For those in their first year of business (or for those that have been not-so-on-top of their stock levels!) let’s take a moment to talk about what a stocktake actually is.

Stocktaking is the act of checking each of the materials and products you have on the shelf to ensure that your inventory tallies are correct.

This is also known as “stock counting” or “inventory checking”.

Stocktaking involves counting each item and comparing to the number you have in your spreadsheet or inventory system to see if they are the same. If they are different, then an “adjustment” is made to bring them into line.

Given small manufacturers have a LOT of material stock on hand at any moment, stocktaking your whole inventory in one go is a huge task. It can take weeks to account for every button, clasp and sq inch of fabric.

For many small self-employed businesses, this means closing their business during stocktake time.

What if we told you there is an easier way of stocktaking that meant that you didn’t have to dedicate huge amounts of time and lose money during the process?

Cycle Counting for Small Manufacturers

Cycle counting is a way of counting small amounts of your stock throughout the year: spreading out your stocktaking into manageable chunks that can work around your handmade business.

How often you choose to cycle count is completely up to you: in large scale manufacturing it is typical to do daily counts, however for smaller craft operations it may be a case of bi-weekly or monthly.

The only requirement is that it needs to be regular enough to cover the majority of the materials you work with during the year.

Tip: Craftybase's material stocktake feature allows you to instantly generate a random or category based list of your materials to count and also sends you reminders every month to ensure that you remember to do your cycle count.

Stocktake cycle counting software for handmade businesses

The sample you select could be a completely random set of materials, or you might like to prioritise materials with high usage / cost.

Alternatively, physical locations may work best if you have your stock arranged in an orderly way - you could work from top to bottom of your storage cabinet, for example. We cover the sampling methods you can use for cycle counting here.

Whichever selection method you choose, the goal is to work regularly through small groupings of your entire stock during the year so that a big one-off count is not necessary at end of year.

Keeping additional records of your cycle counts is a good idea if you use a bookkeeper or accountant, as it will give them confidence in your tracking accuracy.

If you do find a large discrepancy between your actual count and your recorded stock on hand, it’s wise to investigate the cause of this rather than just make a manual adjustment to your records: is it due to your manufacture usage records being over or under estimated, or are you not measuring wastage correctly? Once you have identified the issue, you can then amend the original manufacture records and recipes so that working forward your counts will be more accurate.

Once you are at a stage where your cycle counts are returning accurate numbers, you can then decide to decrease the number of counts you do during the year if you feel that the system is now accurately handling your stock usage for you. If you find the opposite, doing more frequent counts until the cause of the issue is found is often a good strategy.

Tips for successfully cycle counting your inventory

  • Set a calendar alert or reminder at a specific time each week or month and make sure this time is reserved.
  • Start your cycle counts by choosing small samples, if you feel you can handle more build up from there so it doesn’t feel daunting.
  • Choose a typically quiet time where distraction is at a minimum - e.g. the end or start of the day can work well.
  • Find another friendly crafter to use as a “stocktake buddy” - set up a regular Zoom call and do the mini-count at the same time to both keep you in the habit.
Nicole Pascoe Nicole Pascoe - Profile

Written by Nicole Pascoe

Nicole is the co-founder of Craftybase, inventory and manufacturing software designed for small manufacturers. She has been working with, and writing articles for, small manufacturing businesses for the last 12 years. Her passion is to help makers to become more successful with their online endeavors by empowering them with the knowledge they need to take their business to the next level.

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