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Performing a year end inventory count

If you are an inventory-based business, the IRS may require that you count your inventory at year-end. In addition, it is important to document your inventory count and file it for future reference.

To ensure the accuracy of your inventory count

  • When inventory is being counted you shouldn't have items being received, shipped or built. If your inventory is moving, counting will be more difficult and may not be accurate.

  • Depending on the size of your inventory, you may want to designate an Inventory Count day (or half day, or days).

Preparing for inventory count

This is a sample year end inventory process that you can use as an example to create your own process.

  • Determine the day you will be counting inventory (for example, December 31st).

  • Determine the last day to receive Inventory purchases (for example, December 30th). Specify a cutoff time after which no packages will be received into QuickBooks (for example, noon on the 30th).

  • Determine the last day for shipping any orders out for the year (for example, December 30th). Any orders not shipping on the last shipping day will ship out on/after the next business day (for example, January 2nd).

  • Notify everyone that the day before the count is scheduled (for example, December 30th), the inventory and production areas need to get ready for the inventory year-end count.

    For example, as part of getting ready all spare parts should be returned to inventory bins, all damaged goods need to be recorded and all vendor RMA's need to be shipped back and recorded in QuickBooks.

  • (For manufacturing businesses) Notify everyone that production will be working on orders on the last days before the count (for example, December 29th and 30th) that have been built prior to the last day before the count (for example, the 30th). No new orders will be built on the day of the inventory count (for example, December 31st).

Counting inventory

This is a sample inventory counting process that you can use as an example to create your own process.

To perform a year-end inventory count

  1. Divide participants into groups (for example, teams of 2).

  2. Print blank physical inventory worksheets from QuickBooks.

  3. Give each team a sheet with the location to count marked at the top of the sheet. The team will count all items at that location, recording the quantity in the column alongside the corresponding part #.

  4. You may want to have each location counted twice, by two different teams, to verify the accuracy of the count.

  5. If there are multiple locations for an item, the alternate/bulk locations should be counted and recorded on the form for that location.

  6. Compare the count sheets for each location and verify that they match (if multiple teams counted each location).

    For any locations where the counts do not match, have an additional team count them again.

  7. Add the total quantities for each item on all shelves and any alternate/bulk locations

  8. Print physical inventory worksheets from QuickBooks and compare the quantities found in the physical inventory to the quantities in QuickBooks.

  9. Review all items where quantities do not match and adjust inventory as needed.

  10. File the physical count sheets in a folder labeled "Year end cycle count for the year ____."

See also

KB ID# H_MWD_YEAR_END_INVENTORY_COUNT
10/22/2014 5:37:54 PM
PPRDQSSWS407 9102 Pro 2013 9ad8df