Preparation for Physical Count

When you decide to perform a physical inventory, you must prepare for this process appropriately. As a result of the preparation, you generate a physical inventory document (count sheet) and distribute it among the employees who will perform the inventory.

When you are preparing for a physical inventory, you perform the following steps:

1. At the warehouse, you organize the goods to prepare for counting, and you complete data entry related to normal warehouse activities that are not connected to the physical inventory. For details, see Organizing Goods in a Warehouse and Preparing Book Quantities.
2. You prepare accurate book quantities in the system, as described in Organizing Goods in a Warehouse and Preparing Book Quantities.
3. You create the count review document (count sheet) of the needed physical inventory type. For details, see Creating and Distributing a Count Sheet.
4. Optional: You add new lines to a prepared count sheet if you realize that the quantity of some stock items became nonzero after completing data entry related to normal warehouse activities. For more information, see Adding New Lines to a Prepared Count Review Document.
5. Optional: You prepare tag sheets. For details, Using Tags in Counting.

In this topic, you will find detailed information about the preparation process.

Organizing Goods in a Warehouse and Preparing Book Quantities

The system produces the book quantity for physical counts as follows:

(Book Qty) = (Qty on Hand) – (Qty on SO Shipped)

The formula elements mean the following:

Book Qty: The physical count book quantity

Qty on Hand: The quantity of items on hand

Qty on SO Shipped: The quantity of items on sales orders that have been shipped

You have to exclude some items from the physical count because they are not reflected in the book quantity that is printed in the count review document (and used for comparison with the physical quantity). For example, you can place those items in a certain location in the warehouse, label the location to be certain the items will not be counted inadvertently, and skip the counting of this location. You have to make sure those items won't be mistakenly counted; otherwise, there could be an incorrect difference between the book quantity and physical quantity in the count review document.

You have to exclude the following items from the physical count:

• Items that have been received to the warehouse if the receipts cannot be released in the system at the moment
• Items on unreleased inventory issues and not-yet-issued shipments if these items haven't been removed from the warehouse yet

Creating and Distributing a Count Sheet

For every physical count that is performed at the warehouse, you have to create the count review document that is used for processing the count result. On the Prepare Physical Count (IN504000) form, you can review the count lines that will be included in the count review document and initiate the process of creating the document. For details, see To Prepare a Physical Inventory Count.

After you select the physical count type on the Prepare Physical Count form, a preview of the count lines with the tag numbers (if you use tags) is displayed that will be generated for the physical count iteration. Before you start the counting process, you can review the count lines to make sure the needed items are selected for counting and the order of count lines is as expected.

After you have verified the count lines, on the form toolbar, you click Generate PI to prepare the count review document and start the counting process in the system. Starting at this moment, transactional activities should be frozen at the warehouse and the processing of inventory transactions must be paused in the system until the physical count is complete.

When you click Generate PI, the system performs the following actions:

• Generates the count review document that consists of the count lines, which should be populated with physical quantities. The system opens the count review document on the Physical Inventory Review (IN305000) form with the Counting in Progress status.
  Note:

  You can create the count review document directly on the Physical Inventory Review form by clicking Add New Record on the form toolbar without first previewing the count on the Prepare Physical Count form.

  Regardless of how you generated the count review document, if you notice that it is wrong, you can click Cancel PI on the Physical Inventory Review form, make the necessary changes, and create the count review document again.

• Generates the count sheets, which can be printed by using the Physical Count Sheets (IN620500) report, as described in To Print Count Sheets.

  Alternatively, you can export the count review document to a Microsoft Excel spreadsheet (see To Export a Count Sheet to an Excel Spreadsheet) if your organization uses non-paper processesfor counting.

• Generates the count tags, which can be printed by using the Physical Count Tags (IN621000) report. The tags will be generated if the Use Tags check box is selected on the Inventory Preferences form at the moment. For details about how to print tag sheets, see To Print Tags.
• Freezes the release of inventory transactions for the warehouse being counted. Under the Full Physical Inventory method, the system doesn't allow the release of any inventory transactions for the warehouse. For other physical count methods, the system doesn't release inventory transactions if they include items that are currently being counted at the warehouse. The system continues to freeze inventory transactions while the count review document has the Counting in Progress status.

In a count sheet, the items are arranged according to the settings on the Assignment Order tab of the Physical Inventory Types (IN208900) form. For each inventory item included in the count, the document may have one line or multiple lines, depending on how many locations are used to store the item and whether the item has subitems or lot or serial numbers. For items with serial numbers assigned, a separate line is generated for each serial number.

If the Use Tags option is selected on the Inventory Preferences form, the count sheet includes tag numbers for each line generated.

Adding New Lines to a Prepared Count Review Document

When the count review document is prepared, the system adds to the count review document (count sheet) only those inventory items that have a nonzero booked quantity. Thus, if you have prepared the count sheet and then the quantity of some inventory items that are not in the sheet has changed from zero to a nonzero value (because items have been found or received), you may need to add new count lines to the count sheet. On the Physical Inventory Review (IN305000) form, you can add a new line to a prepared count sheet as long as you adhere to the following rules:

• The location and warehouse that you specify in this line must match the location and warehouse selection criteria of the count sheet to which you are adding a line.
• You cannot add a line if the specified combination of inventory ID, location, and warehouse is already included in this physical inventory count.
• You cannot add a line if the specified combination of inventory ID, location, and warehouse is included in any other physical inventory count that currently is in progress.
• The item that you specify in this line must correspond to criteria of the physical inventory type which this physical inventory count is prepared. For example, if you count physical inventory by ABC code, the item should be assigned the ABC code selected in the settings of the physical inventory type on the Physical Inventory Types (IN208900) form. (This restriction applies to all physical inventory types except for those that have the Full Physical Inventory generation method.)

After you have added any new lines and saved your changes, no inventory transactions (issues, receipts, or transfers) are allowed for the added inventory items in the specified location and warehouse.

Using Tags in Counting

Tags may or may not be used in the counting process, depending on your organization's policies for physical inventory counts. A tag count is useful for a full-scale end-of-year physical inventory.

You can print tags by using the Physical Count Tags (IN621000) report, as described in To Print Tags. The tags can be distributed (in accordance with the count sheets) among employees who are participating in the count. Tags can be used for recording the results of the actual counting and for entering the count results when the counting stage is completed.