Cycle Counts

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When to Use a Cycle Count

A cycle count is best when you need a controlled physical count instead of a quick one-line adjustment. It is especially useful before period review, after warehouse cleanup, when a picker reports a mismatch, or when high-value stock needs confirmation.

• Verify every bin at a location.
• Count one zone or aisle.
• Review variances before applying them.
• Keep count history separate from ad hoc adjustments.

Other ways in:

• Search for Cycle Counts in the command palette.
• Use the New Cycle Count quick-create action, which opens this screen with the create dialog already open.
• Open a link to a single count. It opens that count’s counting screen directly. If the count belongs to another company you are a member of, Arcus finds it, switches you to that company, and shows “Switched to” the company name, “to open this cycle count.” If you are not a member of that company, the page cannot find the count.

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Before You Start

• Permissions: anyone with inventory view access can open the screen and read counts. Creating a count, entering or scanning counted quantities, and approving a count all need the inventory adjust permission. Without it, the New Cycle Count button is hidden and count entry is refused.
• Location list: the Location list in the create dialog is read from your locations settings. If the list is empty, ask an administrator for settings view access.
• Location access: if your user is limited to specific locations, you can only create, count, and approve counts at those locations.
• Bins: a count lists the products stored in active bins at the location. Stock that is not assigned to a bin does not appear on a count.

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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.

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Plan Your Cycle Count

Most wholesalers use one of two strategies: ABC Method (by value):

• Count high-value items (A) often.
• Count medium-value items (B) less often.
• Count low-value items (C) least often.
• Focuses effort on the items that hurt most if wrong.

Arcus can schedule these counts for you. Turn on Auto-schedule cycle counts by ABC class at Settings > Shipping & Fulfillment > Warehouse and set the number of days between counts for each class. Scheduled counts appear in this list next to the ones you create by hand. 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.

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Create a Cycle Count

1. Open Operations > Warehouse > Cycle Counts.
2. Select New Cycle Count. The Create Cycle Count dialog opens.
3. Choose the Location to count. Create Count stays disabled until a location is chosen.
4. Choose the Count Type: Full (All bins), Zone (Specific zone), or Product (Across all bins). For a zone count, type the zone code in the Zone field.
5. Choose the Count Mode: Open (counter sees system qty) or Blind (counter sees empty input).
6. Optionally choose a user in Assigned To.
7. Select Create Count. Arcus builds one row per product in each bin in scope and opens the new count.

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Open Counts vs Blind Counts

• Open count: the counter sees the expected system quantity on each row, and the count box is prefilled with it.
• Blind count: the counter sees an empty Count box and no system quantity, and the list shows Pending approval instead of a variance.
• Approval view: for a blind count, Review and Approve reveals the system quantity and the variance of each row before anything is applied.

The count mode starts from the Default new cycle counts to Blind mode setting at Settings > Shipping & Fulfillment > Warehouse. It is off by default, so new counts start as open counts. You can change the mode on each count in the create dialog.

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Conduct the Count

Staff members count the physical inventory on the count’s screen. Each row shows the bin, the zone, the product, and its part number. Manual entry:

• Find the row for the bin and product.
• Count the physical items.
• Type the quantity in the count box.
• Select the check button to save the row.

Scanning:

• Use the Scan Units to Count box at the top of the count.
• Scan each unit’s serial number, SKU, or part number. Each scan adds one to the matching row.
• Arcus confirms each scan with the product name and its new count, and lists the scan under Recent scans.
• Manual entry on each row still works alongside scanning.

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Enter Counted Quantities

1. Open the cycle count card from the list.
2. Work each bin or product row.
3. Enter the physical quantity counted, or scan the units.
4. Save the row.
5. Continue until Count Progress shows every row counted.
6. Review and approve the count when all rows are complete.

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Review and Resolve Discrepancies

After counting, the screen shows the differences:

• Variance - The difference between the system quantity and the physical count, shown on each counted row in green (more than expected) or red (less than expected).
• Variance detected in counted items - A notice under Count Progress when at least one counted row differs from the system quantity.
• Total variance - The count card in the list shows the variance for the whole count, or Pending approval for a blind count that is not yet approved.

For each variance:

1. Review the difference (for example, 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 count is right, approve it.
4. If you are not sure, recount the area before approving. Approving applies every variance on the count.

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Approve a Count

When every row is counted, the approval button appears in the count’s header. Out of the box there is no approval limit: any user with the inventory adjust permission can approve any variance. A company can set an approval limit (Limit before Post Journal Entries is needed) on the Cycle Count Variance adjustment reason (see Accounting Impact). When one is set, a variance worth more than the limit can be approved only by someone who also holds Post Journal Entries.

• Approve and Apply appears when no row has a variance.
• Approve with Variance appears when at least one row differs. Confirm the physical count before you select it.
• For a blind count, select Review and Approve first. It reveals the system quantities and variances, then shows the approval button.

Steps to approve:

1. Select Approve and Apply or Approve with Variance.
2. Arcus applies the approval in one step:
   • Each row with a variance sets the bin quantity to the counted quantity and records a count adjustment in the bin’s movement history.
   • Each variance creates an inventory adjustment transaction at the location.
   • A journal entry posts for each variance that changes inventory value, and it is linked to the inventory transaction it came from.
   • Every counted row is marked verified.
3. The count moves to Approved and you return to the list.

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Accounting Impact

When you approve a cycle count with variances, Arcus posts a journal entry for each product whose inventory value changed. The account on the other side of Inventory is not fixed. It comes from the Cycle Count Variance reason (its name unless your company renamed it) in Adjustment reasons, at Settings > Shipping & Fulfillment > Warehouse, whose Counted down posts to and Counted up posts to columns name the two accounts:

• Shortage (counted less than the system): the cost of the missing units, taken from your cost layers first in first out, is credited to Inventory and debited to the reason’s counted down account.
• Overage (counted more than the system): the found units are valued at the product’s existing cost, debited to Inventory, and credited to the reason’s counted up account.

Every company started with the account its books already used for cycle counts, so entries post where they did before until someone changes the reason. For many companies that account is Manufacturing Variance, a cost of goods sold account. Example JE for a 10-unit shortage of a $50-cost item when the counted down account is Manufacturing Variance:

• Debit: Manufacturing Variance $500
• Credit: Inventory $500

This reflects that the items are gone and no longer an asset. A row whose variance has no value, such as a zero-cost product, changes the quantity and posts no entry. The reason can also carry an approval limit. When one is set and a single product’s variance is worth more than it, the approval is refused unless you hold Post Journal Entries, and nothing in the count is changed. The reason is checked at approval, not while counting, so the first time a count meets a problem can be when you select the approve button. If the reason is turned off, or has no account for the direction of a variance, or its account has been deactivated or is no longer an account that can be posted to, the approval is refused with a message that says so. An administrator fixes the reason in settings, and you approve again.

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Statuses

The status filter also offers In Progress and Completed. Counts created and approved on this screen go from Open straight to Approved. Each row has its own state: uncounted rows show a count box, counted rows show the counted quantity and any variance, and approval marks every counted row verified.

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Other Effects

• Stock levels: approved variances change on-hand quantity at the location and the quantity in each bin.
• Marketplace stock: if you sell through connected marketplaces, approved variances queue the updated available quantities for those channels.
• Activity log: creating a count, each counted row, each scan, and the approval are all recorded in the activity log with the user who did them.
• Live updates: other users looking at the list or the count see changes without refreshing.

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Common Scenarios

• Picker cannot find stock: create a zone count for the zone where the product is stored before adjusting inventory.
• Bin cleanup: count the affected zone after moving or consolidating stock.
• Receiving discrepancy: receive what arrived, then count the affected area if stock is still unclear.
• High-value product review: use a blind count and separate approval.
• Month-end stock confidence: count priority bins before running final inventory review.

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Common Blocks

• No items appear: check the selected location, that the zone code matches the bins’ zone, and that the stock is assigned to active bins.
• Create Count is disabled: choose a location first.
• New Cycle Count is missing: your role does not have the inventory adjust permission.
• Variance is hidden: the count is blind and still in the counter view. Select Review and Approve when every row is counted.
• Approve button is unavailable: all rows must be counted first.
• Counted quantity is wrong: a counted row shows its quantity instead of a count box, so it cannot be retyped on this screen, and each scan adds one more unit. Do not approve the count; create a new count for that area instead.
• Inventory changed during counting: review recent transactions before approving a large variance.

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Messages You May See

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Troubleshooting

“Discrepancy is small but I still want to investigate” - You can approve and still follow up later (for example, “Recount next month”). The approval is recorded in the activity log. “I recounted and got a different number” - Create a new cycle count for that zone. The first count is not deleted; both counts are kept for the audit trail. “Multiple staff members are counting the same area” - Assign one count per person or zone. Typing a count replaces the saved quantity for that row, while each scan adds one to it, so two people working the same row can double count. “Physical count is lower than system; items are missing” - This could indicate picking errors, theft, or damage. Investigate before approving, then approve so the shortage posts to the variance account.

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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.

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Industry Standards

Cycle counting is standard in wholesale distribution and modern ERPs:

• ShipHero - Cycle counting with tolerance rules.
• Fishbowl - ABC cycle counting planning.
• NetSuite - Cycle counts with posting to a GL inventory adjustment account.
• AICPA standards - Periodic inventory verification required for financial reporting.

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