Physical Inventory Basics for Your Truckstop

In a perfect world there would be no need to count items in your store. 

If you diligently kept track of your purchases and sales you would know precisely what your current inventory is. But mistakes and outright theft are part of reality, so in order to know what we truly have in the store’s inventory we must count it. 

The difference or variance between what you count and what you expected is called “shrink.”  Shrink has two sources, theft by customers or employees, and error by either employees or vendors.  Inventory overage is the opposite of shrink.  An overage is when the count was more than expected.  Overages are the indication of an error, no one is secretly donating items to your inventory!  More often than not you’ll be faced with shrink. 

Here we will focus on the physical count and the steps you can take to help ensure a good inventory count.

Inventory Frequency
You should have a plan for the frequency of taking inventory. When creating your plan, consider these recommendations:

• Ideally everything in the store should be counted at least once per accounting period. An accounting period for most is a calendar month. 
• Give strong consideration to counting high-theft and high-dollar items on a more frequent basis.  For example you might count cigarettes and electronics once a week.  I’m aware of a location that counted cigarettes at the end of every shift! 
• If the inventory counting is normally done by store personnel think about using an outside inventory-taking service once a year for auditing purposes. Outside services need supervision too, work alongside them so that they understand how to count your store’s inventory.

Inventory Best Practices
Consider following these inventory best practices:

• Before starting the count, ensure that all purchase orders have been posted and all sales are up-to-date. 
• Unless it’s an entire store inventory count, do the counts in bite-sized chunks. In other words, focus on either a physical section of the store (e.g., the cooler, an aisle, etc.) or items grouped by either sales category or vendor. This is known as Cycle Counting.  Be mindful whether the item being counted exists in more than one location. 
• Overstocks and alternate locations need to be included too. 
• Smaller inventory count batches help to minimize the fact that the truckstop business is 24 hours per day and cannot close its doors for inventory. As soon as something is counted it may be sold before the count is posted! So if the time between when the count is started and when it is posted is kept to a minimum that will improve accuracy.

Special Considerations
Special mention should be made of items purchased in one packaging and sold by another. A good example is cigarettes. Frequently cigarettes are purchased by carton and sold by pack. Each packaging has its own bar code, so without any accommodations on hand problems may arise. To simplify matters some locations treat all cigarettes as packs. In this case a carton is counted as ten packs, using the bar code inside the carton.

Inventory Payoff
Inventory taking is labor intensive, but there are payoffs. By tracking shrink you may be able to narrow down when problems are occurring, which may lead you to what the problem is. Also regular inventory counts will spare you from surprises on balance sheets. Finally regular inventory counts may help to serve as an employee theft deterrent, knowing that the inventory is being watched may make some think twice.