Fall 2011 issue of Horizons

Manufacturing & Distribution

InventoryManagement: Updates on Cycle Counting & LIFO By Nathan Croll, CPA and Tim Kendrick, CPA

Inventory is often the largest consumer of capital for an enterprise. In order for a business to operate effectively and efficiently, maintaining accurate inventory balances whether dollar or item based, is imperative. There’s no doubt that poor inventory accuracy may result in poor customer service. There are many reasons why inventory levels may be inaccurate. By establishing a cycle count program, high inventory accuracy can be achieved and sustained through root cause analysis. In addition, a cycle count program can spread out the work load as compared to a traditional wall-to- wall physical inventory count once a year.

The basics of cycle counting are simple in theory: establish a methodology, perform periodic counts, reconcile and investigate the discrepancies. However, in practice this process can be much more difficult to manage due to the complexities of your business, the volume of inventory, cycle counting methodology or methodologies, etc. The Role of Technology in Cycle Counting The use of technology will not only make cycle counting more manageable; but can make the process more efficient than ever imagined possible. The first building block to a highly successful cycle counting program is the utilization of your company’s ERP system or other inventory management software.

Raise Your Expectations

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