> ## 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
> Use cycle counts to verify physical stock by location, bin, zone, or product. Counts create an auditable review step before variances are applied to inventory.
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.
## 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 a full location.
* Count one zone or aisle.
* Count one product across bins.
* Review variances before applying them.
* Keep count history separate from ad hoc adjustments.
**Use adjustments for small known corrections**
If you already know the exact correction and do not need a count workflow, use
Inventory Adjustments. Use cycle counts when someone needs to physically count and
approve the result.
## 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. Open **Warehouse**, then choose **Cycle Counts**.
2. Select **New Cycle Count**.
3. Choose the location to count.
4. Choose the count type: full, zone, or product.
5. Choose the count mode: open or blind.
6. Assign the count if your team uses named count ownership.
7. Create the count and begin entering counted quantities.
## Open Counts vs Blind Counts
* **Open count**: the counter can see the expected system quantity while entering counts.
* **Blind count**: the counter enters the physical count without seeing the expected quantity first.
* **Approval view**: variance is reviewed before the count is approved and applied.
**Use blind counts when accuracy matters**
Blind counts reduce confirmation bias. They are a better fit for high-value stock,
recurring problem bins, and teams where one person counts and another person approves.
## 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 (open count only).
* 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.
## Enter Counted Quantities
1. Open the cycle count card.
2. Work each bin or product row.
3. Enter the physical quantity counted.
4. Save the row.
5. Continue until the progress bar reaches all items counted.
6. Review and approve the count when all rows are complete.
**Variance is not applied until approval**
Counting a row records the proposed count. Approval is the step that applies the
variance to inventory and records the resulting inventory movement.
## 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.
## Approve a Count
When every row is counted, review the count before approving. If there are variances,
confirm that the physical count is correct, then approve with variance. Arcus applies
the approved difference to inventory and keeps the count record for audit review.
* Rows with no difference can be approved normally.
* Rows with differences should be reviewed before applying.
* Approved counts update inventory quantities.
* Approved variances appear in inventory movement history.
* Accounting impact may be recorded when the variance changes inventory value.
Steps to approve:
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.
## 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.
## Common Scenarios
* **Picker cannot find stock**: create a product or zone count 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.
## Common Blocks
* **No items appear**: check the selected location, bin assignments, and product stock.
* **Create Count is disabled**: choose a location first.
* **Variance is hidden**: the count may be blind and still in counter view.
* **Approve button is unavailable**: all rows must be counted first.
* **Counted quantity is wrong**: reopen the row workflow before approval if your permissions allow it, or create a correction after approval.
* **Inventory changed during counting**: review recent transactions before approving a large variance.
## Troubleshooting
**"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).
## 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.
## 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.
## Related Articles
How to organize bins for faster, more accurate cycle counting.
How to adjust inventory for damage, loss, or other adjustments.
Correct counted stock, choose adjustment reasons, handle unit cost, and review negative-stock warnings.
Monitor stock health, location balances, low-stock alerts, and inventory value warnings.
Audit stock movement history, movement types, supply and demand rows, and FIFO layer detail.
How receiving accuracy impacts cycle count results.