Physical Count Best Practices
“Envi makes physical counting easy for teams in each location across the country, and Envi reports let us look at what we have on-hand. We can see physical count data, purchase history, and usage activity for each facility. We can see how many of an item is used, over time, across our whole organization.” – Laura Arthur, One Medical
Create a recurring process for physical counting, usually once or twice per year
Build more accurate financial reports, budgets and forecasts
Maintain an accurate count of all on-hand inventory
Step 1: On your mark! Physical counts are a key component of inventory and financial management in any organization or facility
🗸 Even if you’re tracking perpetual inventory, a physical count provides validation to ensure accuracy of inventory throughout your organization
🗸 Physical counting helps validate financial reporting, particularly around the value of on-hand inventory
Step 2: Get set! Plan the date, time and team for your physical count
🗸 Many organizations plan an annual count at year end –schedule your count during a slower time period if that’s possible
NOTE: Leading organizations do a physical count twice a year
🗸 Assign counters who aren’t responsible for day-to-day inventory management
🗸 Communicate instructions with counters for consistency, i.e., are you starting from what accounting shows or doing a zero-based count? Are you going to centralize all items into a single area for counting? Are there items you will count as eaches or will you only count boxes? If a box is open, do you count it?
🗸 Leverage bin / shelf locations in your Materials Management Information System (MMIS) to identify where products are located and where counts will take place
Step 3: Use history and current data to model a solid forecast
🗸 Compare the current snapshot of inventory to the same time period for prior year(s)
🗸 Assess current inventory levels based on patient and procedure volumes – are they going up? Down?
🗸 Identify items that need a par adjustment based on current usage trends
Step 4: Go! Get your count, then compare physical counts against the assets listed in your accounting system
🗸 Create a reconciling entry to ensure accounting reflects actual assets on shelves
NOTE: As products are identified as broken or expired, don’t wait until next year’s physical count to write them off. Instead, do it throughout the year and get these products off the books
Step 5: Large organizations managing large inventories, augment your physical count with scheduled cycle counts
🗸 Cycle counting helps maintain inventory accuracy throughout the year
🗸 Identify A-B-C product groups and set up a recurring schedule
– “A” – most frequently consumed and / or highest dollar volume. Use the 80/20 rule here and identify the top 20% of the products you’re buying for more frequent counting
– “B” and “C” – let the rest of your products fall into less frequent cycle counts, with the Cs being items used infrequently by your organization, but recurring nevertheless
Step 6: Support your audit function
