Definition Cyclical Inventory
There is an internal process in businesses that contains making an inventory of the products and raw materials that are part of current assets: the company’s stocks.
Generally, this process is usually carried out at the end of the year to make the accounting closing. Still, there is a concept linked to this inventory which is the cyclical inventory.
Taking an inventory is an administrative matter to be able to keep the balance sheets and be able to present the annual accounts in the Commercial Registry. On the contrary, keeping your inventory managed with an inventory management system during the year help you to maintain the real-time data to achieve other objectives.
This post explains step by what this cyclical inventory consists of and why it is crucial.
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What is the cyclical inventory?
Also known as cycle counting or rotating counting, we are talking about a method to improve the reliability of our inventory control.
If we do not carry out effective inventory control and management tasks periodically throughout the year (monthly, bi-monthly or quarterly), it will be much more complex to do the accounting for the year later.
And above all, we must accept in mind that to make choices each quarter, we have to know what stocks we have, what has sold more, and what has sold less. If we do not control these aspects sometimes (apart from the accounting closing), we will not be sure that there are no imbalances in the inventory or decisions based on actual data. When it comes to, for example, buying new merchandise
Why is cyclical inventory important?
There are some reasons why it is worth taking a business cycle inventory:
1. Large inventory companies cannot wait until the end of the year to do the inventory calculation. They must do it periodically and have a tool that allows them to streamline. The process and proves how stocks are being managed since companies have a very high volume of articles.
2. It helps us reduce errors in warehouse management. If we are making serious mistakes in warehouse management, we have to be aware of them to make decisions. Otherwise, when closing the accounting, we find a considerable volume of work and many errors that must be corrected. It is not always possible to update all the mistakes made, which implies a handicap for the company.
3. Make better purchasing decisions. If every month, or every area, we know what articles we still have in hand, we will have a complete idea of how the company works. It not just a matter of count stocks, but of seeing what has been sold and what has not made purchasing decisions.
How to do the physical inventory count?
Doing this type of examination four times a year can be very complex. Many dealings already spend a lot of time at the end of the year to close the inventory and have the yearly accounts prepared. Naturally, there is very little time to complete this task.
However, it crucial to do a cyclical inventory to reduce workloads, or at the very least. Ensure that the data we have agrees to reality. In this intellect, having an online inventory management tool will allow us to better control stocks without the need for us to invest a significant amount of time accounting for supplies.
According to the value and incidence of sale of a particular stock, some companies carry out the cyclical inventory. Do not do it entirely but based on an ABC classification, ordering. The items from highest to lowest value and from highest to lower sales incidence.
In this intelligence, although we do not carry out a complete control of the stock quarterly. We can monitor the most important products or those that generate. The most benefits since they are the basis of our business. Therefore it more critical than Let us check that there no accounting errors.
myGESTIÓN, your ERP for inventory management
So that stock control tasks do not become too complex, it essential to bet on digital tools. That allows us to save time, improve our productivity, and optimize our warehouse management.
Notwithstanding how we want to carry out inventory control. Having the right tools and technology will save you a lot of time.
First, there will be fewer errors when accounting for purchases and sales. Because everything digitized, and you do not have to carry out manual accounts.
Your myGESTIÓN management software has a purchasing and sales module and warehouse management. And stock control to manage your inventory better periodically, and the process not so complicated.
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