How Bad Counts Cost Companies Money

In a world that is continuously changing and adapting, business owners are forced to continuously implement “best business practices” to better operate within the highly constrained and margin sensitive food and beverage niche.

How does inventory equal dollars?

In this article, we will delve into a simple, yet problematic business practice. Often, poor tracking of inventory can lead to stockouts which can cause lost sales and angry customers. When businesses run out of items, while simultaneously promising the delivery of said items to clients, it can erode trust over time. On the flip side, overstocking can lead to cash flow strain with capital tied up in excess inventory. As items continue to sit in a warehouse unused the risk of expiration or obsoletion dramatically increases. Inaccurate inventory leads to bottlenecks, inaccurate financial reporting, and can cause operational inefficiencies. In Business Central (BC) specifically, inventory costs flow to the G/L through the Inventory Account, COGS Account, and Adjustment Account. If quantities are wrong, the financials are also wrong.

How can the Physical Inventory Journal help with counting?

By utilizing the native Physical Inventory Journal functionality within Business Central this problem is solved. This functionality is so effective in part because of its ability to segregate duties. In real life a warehouse manager / controller would access the physical inventory journal and calculate and print all of the inventory “housed” within the system. This physical copy would then by given to a warehouse worker to go physically count items that are on shelves or bins (depending on warehouse set). Once those quantities are recorded on paper, the warehouse manager would simply go into BC and enter the actual counted quantities in BC under the “Qty. Phys. Inventory” field. Often a controller would then go into BC look at the unposted Physical Inventory Journals review the variances, make positive or negative adjustments, and post the journals. Now that the journal is posted, the finances will impact the general ledger (Inventory within the accounting system matches physical inventory counts!) No more bottlenecks, no more reporting errors, all done in a segregated manner to ensure accountability and transparency.

This same process can be used for cycle counting smaller areas or selections of inventory. This can be done by item, by row, by rack, by A’s, B’s and C’s inventory etc. By segregating and counting more often the business can continue to run without significant shutdowns to perform a large physical count. The key is whatever you are counting must remain stable for the count to be successful.

Now, how do you do this in Business Central?

Navigate to your Physical Inventory Journal using the Global Search
Create/select a journal batch for the time period then select Prepare > Calculate Inventory

Key fields to Enter:

• Posting Date: The actual date you are performing the inventory count
• Document No. : Your internal reference number associated with the count
• ‍Filters: You have the option of entering multiple filters based on your needs (These are the most helpful)‍
  
  • Location Filter: This is referencing the specific warehouse you are counting (You might have multiple warehouses / locations in the system)‍
  • Item No. or Category: If you want to filter for a specific item (For general counts leave this field blank and run it wide open to pull in all items)‍
  • Bin Filter: Often used for doing smaller counts of a rack or row.

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Now that all of your inventory at that location is pulled in navigate to Home and select Print

The printed sheet will look like this. A warehouse employee will now be able to record the physical counts of the inventory within the warehouse.

In this scenario upon reconciling our inventory, you can see that we had 5 less of the S-210 Semi-Automatic and 10 more of the Housing Airpot in our inventory. Business central will automatically calculate the difference and change the entry type to negative adjustment / positive adjustment and change the quantity field.

Now, after the adjustments have been reviewed by a controller it is ready to be posted and subsequent changes will be made to the General Ledger.

As we can see once we drill down into the subsequent entries that were made in the G/L entries the two adjustments have been made.

Congratulations, in a couple of short steps you were able to quickly reconcile the inventory on hand at that warehouse location/bin. This can be a very useful tool for companies that have a high volume of transactions. The calculation is often the easiest part, the physical count and recounting large anomalies takes the most amount of time.

Reach out to us for advanced mobile counting procedures based on the Business Central Phys. Inventory Journal, using Advanced Inventory Counts and Warehouse Insights.

For more information regarding warehouse management, check out our other articles in our breakroom.

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