Count-Day Playbook

  • Freeze movements; segregate receiving/shipping.
  • Tag control log issued → used → voided.
  • Independent test counts for A-items.
  • Cut-off slips numbered to last receipt/shipment.

Pair with Inventory FIFO/LIFO, Year-End Close, PBC, and Fixed Assets.

Rollforward

Count date → year-end: add receipts, subtract shipments, tie to GL. Retain with preparer/reviewer sign — see Month-End Close and Bank Rec discipline.

Link valuation to Financial Statement Analysis and costing to SOX 404 where material.

Pre-Count Preparation (2 Weeks Out)

A clean count starts before count day:

  1. Freeze the item master. Deactivate dead SKUs, merge duplicates, and confirm units of measure. Every duplicate SKU doubles count effort and creates variances.
  2. Zone and label locations. Aisles, bins, and bulk areas get unique IDs on a floor map. Unlabeled overflow pallets are where auditors find unrecorded inventory.
  3. Pre-count high-value A-items. Cycle-count the top 20% by value a week early and resolve breaks now — see Cycle Discipline. Count day then confirms rather than discovers.
  4. Brief the teams. Counters, re-counters, and a control desk with tag authority. No counter verifies their own section.
  5. Stage cut-off documents. Pre-number receiving and shipping slips; record the last numbers used before freeze and the first numbers after release.

Worked Example: Rollforward to Year-End

Count date December 18, year-end December 31. Counted value: $4.20m.

Step Amount
Physical count Dec 18 $4,200,000
Add: receipts Dec 19–31 (GRN log) +$310,000
Less: shipments Dec 19–31 (BOL log) −$480,000
Less: scrap/write-offs with approvals −$12,000
Rolled GL expectation Dec 31 $4,018,000
GL balance Dec 31 $4,024,500
Unexplained difference $6,500 (0.16%, investigate)

Reconcile every line to source logs — receipts to purchase records, shipments to invoices in ASC 606 cut-off workpapers. Investigate the $6,500: recount the affected zones, check for unlogged transfers, then adjust with reason and approval. Plugging the difference without investigation is an audit finding.

Obsolescence Testing in Practice

For each product family, pull: units on hand, months of cover at current run-rate, last sale date, and post-year-end sales through fieldwork.

Signal Action
No sale in 12 months 100% reserve review
Cover >18 months with declining demand Partial reserve, document NRV math
Superseded revision still stocked Write down to scrap/return value
Post-year-end sales below cost True-up reserve to realized loss

Tie the reserve memo to Financial Statement Analysis margins and retain buyer quotes or scrap bids as support. The controller reviews, the CFO approves — never the warehouse manager alone.

FAQ

Can we cycle-count instead?

Yes with strong perpetual records and auditor agreement; otherwise full wall-to-wall.

What documentation is mandatory?

Instructions, tag log, test counts, variance log, rollforward, obsolescence memo per Audit Procedures.

Next Steps

  1. Freeze count date and instructions now.
  2. Pre-clean master data and locations.
  3. Reconcile rollforward before audit week.