Skip to main content

Documentation Index

Fetch the complete documentation index at: https://docs.arcuserp.com/llms.txt

Use this file to discover all available pages before exploring further.

Cycle counts are partial inventory checks done during normal operations. Instead of counting everything at year-end, you count small sections regularly to catch discrepancies early and maintain inventory accuracy.

​
Why Cycle Count

Cycle counting provides:
  • Accuracy - Catch and fix discrepancies before they affect fulfillment
  • Continuous verification - Spread counting work across the year instead of one big annual count
  • Root cause analysis - Small sections make it easier to trace where errors occur
  • Compliance - Auditors expect documented inventory verification procedures
  • GL alignment - Regular counts ensure the system matches physical reality

​
Plan Your Cycle Count

Most wholesalers use one of two strategies: ABC Method (by value):
  • Count high-value items (A) every 4 weeks
  • Count medium-value items (B) every 8 weeks
  • Count low-value items (C) every 6 months
  • Focuses effort on the items that hurt most if wrong
Geographic Method (by location):
  • Assign one aisle, shelf, or corner per week
  • Rotate through the entire warehouse on a schedule
  • Easier to staff if multiple people count simultaneously
Plan for growth If you have 200 SKUs and 4 weeks per cycle, you need time to count 50 SKUs per week. If you expect to grow to 500 SKUs, plan for 125 per week. Adjust the count frequency now or you will fall behind.

​
Create a Cycle Count

  1. Go to Inventory > Cycle Counts.
  2. Click Create Cycle Count or Start Count.
  3. Select the counting method:
    • By SKU - Manually select which products to count
    • By Bin - Select which bins to count
    • By Location - Count all inventory in a specific warehouse area
  4. If selecting manually, add the products or bins you want to count.
  5. Optionally, set a count date/time or deadline.
  6. Click Create Count.
Create cycle count form with method selection and product entry

​
Conduct the Count

Staff members count the physical inventory: Desktop method:
  • Open the cycle count on a computer
  • For each product, see the system quantity
  • Count the physical items
  • Enter the actual count
  • Compare and note any discrepancy
Mobile/scanner method:
  • Use a handheld scanner or mobile app
  • Scan the bin label or product barcode
  • Manually enter the count, or use a scale if the system supports it
  • The app validates against the system quantity in real-time
Cycle count form with system quantity and physical count fields

​
Review and Resolve Discrepancies

After counting, the system calculates differences:
  • Variance - The difference between system quantity and physical count
  • Variance percentage - How far off the count is relative to the system quantity
  • Tolerance - Your entity’s acceptable discrepancy level (default: 2%)
For each variance:
  1. Review the difference (e.g., system says 100, you counted 98)
  2. Determine the root cause:
    • Picking error (staff picked more than recorded)
    • Receiving error (vendor shipped fewer than on PO)
    • Mis-location (items stored in the wrong bin)
    • Damage or shrinkage (items lost to breakage, spillage, or theft)
  3. If the difference is within tolerance, you can approve the count as-is
  4. If the difference exceeds tolerance, investigate or adjust the system count with a reason code
Cycle count variance summary showing items within and exceeding tolerance

​
Approve the Count

Once all discrepancies are reviewed:
  1. Click Approve Count.
  2. Optionally, add notes about the overall results.
  3. The system posts adjustments:
    • Each variance creates an inventory transaction
    • A GL journal entry posts for adjustments that exceed tolerance
    • The system quantity is updated to match the physical count
  4. The cycle count is marked complete.

​
Troubleshooting Counts

“Discrepancy is within tolerance but I still want to investigate” - You can approve and still file a note for future investigation (e.g., “Recount next month”). Use the activity timeline. “I recounted and got a different number” - Create a new cycle count for just that product or bin. The first count is not deleted; both counts are logged for the audit trail. “Multiple staff members are counting the same area” - Assign one count per person or region. If two people count the same bin, the second count overwrites the first unless you configure team counting mode. “Physical count is lower than system; items are missing” - This could indicate picking errors, theft, or damage. File a missing inventory report and adjust per policy (damage report, insurance claim, shortage JE).

​
Accounting Impact

When you approve a cycle count with variances:
  • Small adjustments (within tolerance) are posted as GL entries to an adjustment account
  • Large variances (exceeding tolerance) may be escalated to accounting for investigation before posting
Example JE for a 10-unit shortage of a $50-cost item:
  • Debit: Cost of Goods Sold $500
  • Credit: Inventory $500
This reflects that the items are gone and no longer an asset.

​
Industry Standards

Cycle counting is standard in wholesale distribution and modern ERPs:
  • ShipHero - Cycle counting with tolerance rules (2% typical)
  • Fishbowl - ABC cycle counting planning
  • NetSuite - Cycle counts with posting to GL Inventory Adjustment account
  • AICPA standards - Periodic inventory verification required for financial reporting

​
Best Practices

Count regularly - Weekly or bi-weekly is common for high-throughput warehouses. Monthly works for smaller operations. Rotate staff - Different people counting the same area over time improves oversight and catches collusion or consistent mistakes. Investigate patterns - If the same product is consistently off, there is a systematic issue (wrong bin assignment, picking from wrong location, etc.). Fix the root cause, not just the count. Archive results - Keep all cycle count records for audit trails and to show that inventory controls are in place.

Bin Setup and Management

How to organize bins for faster, more accurate cycle counting.

Manual Adjustments

How to adjust inventory for damage, loss, or other adjustments.

Receiving

How receiving accuracy impacts cycle count results.