Physical Inventory overview

CAUTION: Use caution when working with the below product functionality. Always create a backup of your data before proceeding with advanced solutions. If necessary, seek the assistance of a qualified Sage business partner, network administrator, or Sage customer support analyst.

To start a physical inventory click Utilities, and then click Physical Inventory.

When you first start a physical count, the system displays the Count Sheets window so that you can initiate the process. If you then close and re-open this window, the processing window appears instead, until you complete the process.

The Physical Inventory feature comprises different steps. The process is also time critical in parts, especially if you have a large number of items to count, and you wish to continue moving stock items in and out of your warehouse.

The physical inventory process:

1. Ensure as far as possible that you clearly designate the inventory in your warehouse(s). For example, you must not count items for which you have already produced invoices, but which you have not yet delivered. Freeze the physical movement of inventory you wish to count. You may continue to use the system in the normal way without interruption.
2. Choose the range of items you wish to work on, and initiate the process. The system copies the theoretical quantity on hand at that point in time for each of these items.
3. Print count sheets or export count data to a hand-held device, such as a Palm Pilot, that you use for counting.
4. Physically count the items and write the count on the count sheets or enter the physical count of each item in a hand-held device.
5. Once you are satisfied that the physical count is accurate, you can resume inventory movements. However, if you have relatively few inventory items, and you can wait until the whole process is complete, you should do so.
6. Enter or import the counted quantities.
7. Print the count variance report, which shows differences between theoretical and actual values. You should examine each variance, recheck the quantities if necessary, and ensure that variances are real. For example, someone could confuse two similar items and enter quantities under the incorrect part number. Update any errors in the counted quantities. You should ensure you have a corrected copy of the variance report, as you need to post the cost values of the differences to the general ledger.
8. Adjust the on-hand balance to reflect any differences. These could be positive or negative differences.
9. If the Post inventory adjustments to G/L check box is selected in the Inventory setup subsection of the System Setup window, you will be prompted to make a general ledger entry after adjusting inventory. Otherwise, manually create and post journal entries to reflect the adjustments. Typically, these adjustments are to the inventory-on-hand accounts (assets) and the cost-of-goods sold or inventory-adjustment/write-down accounts.
10. If you use the LIFO or FIFO costing method, the system automatically creates dummy receipts in those rare cases where there is more physical inventory than theoretical inventory. In most variances, you have less physical inventory than there is on file. In this case, the system skips receipts so that the net remaining receipts equal the physical count