Taking an Accurate Inventory Count in Your Retail Store
How To Take A WhizBang! Inventory
Why bother to take an accurate physical inventory of your retail store?
The inventory of merchandise in your store is probably the biggest asset in your business as well as your biggest business expense. Knowing exactly how much and exactly what you own is the first step in learning how to control your inventory. And great inventory management is your key to higher profits! Here are three ways having an accurate inventory count will help you improve profits.
Shortage.
Shortage or overage in inventory can usually be attributed to one of several factors:
- Theft, either internal or external
- Incorrect ringing of sales in the store
- Paperwork problems in receiving merchandise, transfers, or RTV’s
Shortages from theft and incorrect ringing directly eat into your store’s profits. Determining which factor or, more likely, which combination of factors is responsible for your shortage/overage takes some detective work. Knowing where the shortage problems are and how severe they are in each area will give you the starting point for your search.
Your inventory affects your bottom line.
Don’t risk paying extra taxes! If you over estimate the dollar value of your inventory your cost-of-goods will go down, your profit (on paper!) will go up and you’ll pay taxes on income you didn’t actually earn. No one wants to give Uncle Sam more than he’s actually due!
And don’t sell yourself short, either. If you under estimate the dollar value of your inventory, you’ll show less profit, which may have a negative effect on your relationship with your banker, investors or your spouse who always thought the store was a crazy idea anyway. (“Dear, don’t you think its time you found a ‘real’ job?”)
To get a true picture of how well your retail business is doing you need to have a totally accurate inventory count of how much inventory you own.
POS updating.
Remember the old adage “garbage in, garbage out?” Bad inventory numbers make your POS system nothing more than a very expensive cash register. Make sure your investment in a POS system pays.
There are many possible methods for taking store inventory.
Here’s a look at some of the favorite ones being used by store owners today and an explanation of how and why ours works better than all the rest.
The yellow pad method.
This is the favorite method of most retailers who don’t have a computerized POS system. Using this method, you give everyone a yellow pad and have them attack the store, writing down a list of all the products they find.
Unfortunately, with this method there is no way to ensure that your entire inventory is counted ONCE and ONLY ONCE. It’s far too easy to miss merchandise or double count merchandise.
This is the method Bob originally used in his stores and if you want to hear a good retail story, call and ask him about the very last time he ever did inventory this way!
The scavenger hunt method.
This method is a favorite of retailers who do have a computerized POS. In this method you take a print out of all the inventory the computer says you should have on hand and go look for it.
Sounds good, but in addition to all the same problems you have with the yellow pad method, there is one more problem with getting an accurate inventory count. It doesn’t take into account any merchandise that may be on your floor but not in your computer. OK, in theory nothing should be on the floor that’s not in the computer but… it happens.
The “little bit at a time” strategy.
This is a strategy that gets combined with both of the methods above and compounds their problems!
Using this strategy, your inventory gets counted a little bit at a time over a period of days, weeks or months. One day during store hours you’ll count the sweater department, and the next you’ll count the shoes.
While this might work to correct on-hand counts in your POS for buying purposes, it doesn’t work at all for getting an accurate inventory count. And that is what you need for creating a true profit and loss statement and for figuring out your shortage – a “snapshot” of exactly how much inventory you own at one specific point in time. You should count the entire store all at once, after the close of the business day.
If you need help with how to control inventory, check out the Inventory Counting kit. It’s one of the great resources available in the Retail Mastery System.
The method we have developed that shows you how to best control inventory is a combination of the best practices used by very large retailers and refined for use by small and mid-sized independent retailers.
The “big boys” have spent literally hundreds of years, millions of dollars, and a gazillion man-hours learning and perfecting how to count a wide variety of merchandise. The stakes for them are very high and so they’ve worked very hard to get it right. There’s no need for you to reinvent the wheel – we’ve figured it all out for you.
Using this method you:
- Systematically map out your store
- Clean, organize, and correctly tag all merchandise
- Develop a strategy for efficiently using all your retail sales staff to help
- Count all your merchandise once and only once
- Ensure counts are correct with a system of double checks
- Complete a full count of your store in one night
- Compile and analyze your inventory results
