How to conduct a year-end inventory count

What is the purpose of year-end inventory counts?

Your end-of-year inventory count is important because it makes sure what stock you have on the shelves matches what’s in your books. Essentially, it’s one large cycle count. However, instead of breaking your inventory into small sections and completing a whole count over several weeks, it’s done all in one push.

Once you have your inventory count complete, then you’ll be able to know your ending inventory and complete a yearly financial analysis. Your ending inventory is the total value of all the products you have available for customers at the end of the year, which typically aligns with most business’ accounting period.

Advantages of knowing your ending inventory

• Know exactly what products you have on your shelves and/or in your warehouse
• Hold accurate inventory records for accounting purposes
• Gain insight on what products you’re sitting on and losing money from to remove from your next purchase order
• Consider adjusting periodic automatic replenishment (PAR) levels for top-selling products that are low in stock
• Make business decisions based on data rather than intuition
• Determine the cost of goods sold and total net income
• Know the profitability and demand volume for expansion consideration 

What you need:

1. POS system

Having a reliable POS system, like Clover, is essential for having accurate, real-time sales data. Whether you’re on the Station Solo or Flex, keep track of sales on one system. That means less time managing records and more time selling during the holiday season.

2. Inventory management software

Conducting your end-of-year physical inventory with an inventory management platform, like Thrive Inventory from Shopventory, will help you automate the count. Easily view any stock discrepancies and sync out any inventory edits to your Clover account and/or eCommerce platform. Additionally, instantly know your ending inventory value, eliminating a complicated ending inventory formula and human error.

3. Trustworthy staff

Calculating your ending inventory is a huge feat and having staff you can count on is essential. In order to hold your team accountable, set user permissions in Clover employee management software to have greater control over sales and inventory changes.

Also, require a manager’s approval before submitting your final physical count and making changes to your sales channels.

4. Barcode scanners

While you can complete your physical inventory count using online spreadsheets or a pencil and paper, that increases room for human error. Barcode scanners not only increase accuracy but can save you hours as you cycle through your stock.

5 steps to conducting your end-of-year inventory count

1. Complete a full inventory stock count
2. Make note of any inventory discrepancies
3. Assign a troubleshooter to audit and confirm the findings
4. Update your stock records to match your physical inventory
5. Calculate your ending inventory automatically with Thrive Inventory or using the ending inventory formula below

How is ending inventory calculated?

If you’re not using an inventory management software that automatically calculates your ending inventory, then you’ll have to use the following ending inventory formula:

Beginning inventory + net purchases – COGS = ending inventory

Here’s how that formula breaks down:

1. Beginning inventory: The value of all the products your business had on hand the beginning of the year or accounting period
2. Net purchases: The value of all the new inventory added during the year or accounting period
3. Cost of goods sold (COGS): The total value associated with selling products to customers including labor and utilities

Here’s some year-end inventory best practices:

• Practice cycle counts and proper inventory management throughout the year to reduce end-of-year stock discrepancies
• Organize a plan to account for all your stock
• Allow your team enough time to complete the inventory count, ideally on a day you aren’t open
• Close out all shipping, receiving, and transactions before the count
• Have at least two people or teams complete the count separately to ensure accuracy
• Provide snacks or give gift cards to staff to make the process more fun and rewarding

In the hustle and bustle of the holiday season, conducting a year-end inventory count may seem like an additional challenge for business owners. However, this essential task ensures that the stock on your shelves aligns accurately with your records, setting the stage for a comprehensive yearly financial analysis. Armed with precise data about your products, you can make informed decisions, adjust inventory replenishment levels, and strategize for the upcoming year. As the year comes to a close, an accurate ending inventory becomes the cornerstone for future success, enabling you to plan, adapt, and thrive in the new year.

How can we help?

If you want to learn more about how Clover can help you accept payments, run your business and sell more, please contact your Clover Business Consultant. You can also follow us on Facebook and Instagram. 

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This information is intended solely for informational purposes and should not be interpreted as legal, financial, or tax advice. Readers are strongly advised to consult with their attorneys, financial advisors, or tax professionals to obtain guidance tailored to their specific circumstances.