Physical inventory
Also called wall-to-wall count
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is physical inventory?
A physical inventory is a complete count of every item in a warehouse or branch at one time, to confirm the stock records and the inventory value. That value feeds the financial statements; many distributors do one each year, and those with a reliable cycle-counting program may skip it with their auditors’ agreement.
How it works
Shipping and receiving stop or slow down during the count. When the count finds less than the records show, the gap is called shrinkage, and it comes from theft, damage, receiving and picking errors, and items taken without being recorded.
Physical inventory example
A branch closes at noon on the last Saturday of the year, and teams of two count every bin. Their totals replace the ERP’s on-hand quantities before Monday.
Related terms
- Cycle countA cycle count is a count of a small set of inventory items, done on a rolling schedule through the year to keep the ERP’s stock numbers accurate.
- Bin locationA bin location is the exact spot in a warehouse where an item is stored, written as a code for aisle, rack, shelf and position, such as 12-C-03.
- ABC analysisABC analysis is a way of ranking inventory items by importance, such as sales or gross profit, and sorting them into classes A, B and C.
