Year-End Inventory: How to Make Product Counts Less Painful

Year-end inventory | Shopify Retail blog

The holidays are here, and bustling seasonal sales are helping put many retailers back in the black. While many celebrations are already in full swing (we know you’re ready to pop that bottle of champagne), there’s one major task left on your annual to-do list.

‘Tis the count your products. It’s that time of year again for year-end inventory. The time of year that all retail business, big and small, need to complete inventory for year-end tax requirements and financial statements. It’s not the most glamorous way to finish off the year, but it’s something that needs to be done.

On top of providing accurate counts of your products for tax purposes, doing a physical inventory has a number of other advantages. Entrepreneur’s article “What You Need to Know About Managing Retail Inventory” outlines a few reasons doing inventory at the end of the year is a necessary evil:

  • Theft control: Physical counts are a great way to validate that sales match order information, and that there are no discrepancies caused by employee or customer theft.
  • Better customer service: Getting an accurate picture of what inventory you have on hand helps ensure that you’re able to meet all orders and stock up on items with low numbers.
  • Product tracking: Year-end inventory is as good a time as any to look back at the year and evaluate what products are selling well and which ones might be worth dropping going forward.

As a retailer, you’re probably well aware of the many reasons year-end inventory is a good business practice. Now, let’s take a look at how you can improve the process of physical counts.

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Physical Inventory Tips

Conducting a physical inventory count can be daunting. It’s monotonous, it requires pinpoint precision, and it takes valuable time to do correctly. Here’s some helpful ways to make this tedious process a little smoother (and a bit less painful).

Schedule Accordingly

One of the more difficult things about year-end counts can be finding the time. Scheduling time to shut everything down to complete counts in store and at any warehouses can affect business revenues — particularly during this busy shopping season. Ideally, you’ll be able to find a time when all retail locations and fulfillment centers are closed to avoid confusion. If this requires closing early or adjusting the operational hours of certain locations, be sure to effectively communicate the temporary change and mitigate customer expectations.

To achieve this, ensure you inform your customers of any location closures or changes in hours as early as possible — the more notice, the better.

For some retail companies, especially large multinational businesses, it may not be possible to halt all transactions to complete inventory count. In the post “Procedures for Year-End Inventory Count”, Small Business advises regarding stopping all orders, “If that’s not an option, try to get the count done during a slow period. Put the process of receiving and shipping product on hold. The goal is to keep movement of inventory to a bare minimum to maximize accuracy.”

Do Your Prep

There’s lots you can do before the actual count to set your team up for success and take some of the load off the year-end count itself. But that means completing some of the prep work in advance, including:

  • Tidy up: Get everything in order so there’s no time wasted during the count locating stray items and mislabeled boxes. Organizing product on shelves and returning all items to their rightful places in the days leading up to the count will make everything run more smoothly.
  • Find a place for everything and label it: It’s not enough to simply tidy up and put your products away. Everything should have its place, and should be marked accordingly. That includes stray empty boxes, errant shipping pallets, or anything else that may not have a home.
  • Create a map: Divide the work between employees participating in inventory counts. Then provide in-depth store and warehouse maps to all employees to get them familiar with their designated areas to count.
  • Distribute checklists: Plan and assign tasks ahead of time and create custom checklists for each team. Setting expectations before the counting begins ensures that nothing is missed and everyone is working to an end goal during the count.

Manage your inventory with confidence

Only Shopify POS helps you manage warehouse and retail store inventory from the same back office. Compare inventory costs to revenue, see which items are selling out or sitting on shelves, forecast demand, and more.


Ensure that you’ve scheduled enough bodies to complete the physical count during the designated time slot. Completing the count in one go during off-hours is the best way to avoid confusion and having to re-do counts that have be altered by purchases or order fulfillment. Schedule employees to work in teams of two to ensure accuracy and assign extra teams to spot check sections for validation.

It may also help to assign specific staff members to different tasks — for example, one employee can be responsible entirely for data entry. Get them to start entering inventory counts an hour or two after your other staff members begins their checks so that this important task isn’t left until the end.

Also make sure you’re giving your staff as much notice as possible if you need them to come in during strange hours to help with the year-end inventory count. These physical counting shifts are an opportunity to work on team building — keep morale up by providing fun snacks, meals, and of course lots of coffee.

Tips to Consider While Counting

You’ve done your advanced prep work, you’ve staffed up for your counts, and everyone knows their assignments. Good news — you’ve already won half the battle just by getting this far.

When you make it to the actual process of your year-end inventory count, also consider implementing a couple of these pro tricks:

  • Audit while you count: Just as you might assign someone to record your inventory counts while they happen, do the same for your audit. Don’t procrastinate on this tedious task — go ahead and audit as teams are counting. Double checking counts as they occur makes it far easier to nip and miscounts or other issues in the bud.
  • Weight shipping supplies and packaging items: Rather than counting individual plastic bags, hanging hooks, or single packing peanuts (who has that kind of time??), simply record these items by weight.
  • Review your count immediately to make improvements: Once you’ve completed your inventory counts and have reconciled your point-of-sale system, reflect on your processes. Is there any room for improvement? Can you make your counts more efficient? Record your thoughts and experiences while they’re fresh in your mind so you can make the needed improvements for the next count.

Looking Forward

Now that we’ve covered some techniques to make this year-end inventory count less painful, let’s take a look at some options to make the ordeal even smoother for the end of next year.

Here’s some things you can do starting now to streamline 2017’s year-end inventory count:

  • Use automated scanning products, like StockSavvy to “Save time by scanning and updating Shopify inventory or for user defined locations/identify inconsistencies and maintain accurate inventory count.” Scanning products helps save time and resources in the process of physical counting. Someone still needs to go through the inventory and scan the items, but it eliminates the need to manually count and log product numbers by hand.

  • Hire external companies to help with inventory management, like WIS. This international inventory service company provides varying services, including full-service inventory — where trained WIS employees handle all aspects of your inventory count. This is an especially helpful option for retail businesses that don’t have enough staff over the holidays to complete the year-end count.
  • Perform cycle counts throughout the calendar year. Cycle counting spreads out the inventory counting process across days, weeks, or months to take the strain off the end of the year. In our guide on inventory management, we outline the method of cycle counting. “Each day, week, or month a different product is checked on a rotating schedule. There are different methods of determining which items to count when, but, generally speaking, items of higher value will be counted more frequently.”

How Will You Prep for Year-End Inventory?

Year-end inventory counts can be a large undertaking, but with the right prep and methods, it doesn’t need to be a painful chore. 

Manage your inventory with confidence

Only Shopify POS helps you manage warehouse and retail store inventory from the same back office. Compare inventory costs to revenue, see which items are selling out or sitting on shelves, forecast demand, and more.

Year-End Inventory FAQ

What is the purpose of year-end inventory?

The purpose of year-end inventory is to provide an accurate and up-to-date record of all the company's assets and liabilities. This includes physical assets such as inventory, equipment, and buildings, as well as financial assets such as accounts receivable and accounts payable. Year-end inventory also provides a snapshot of the company's financial health and helps to identify any discrepancies in the books.

How do you calculate year-end inventory?

Year-end inventory can be calculated by taking the beginning inventory plus the purchases during the period minus the cost of goods sold. This calculation is formally called the inventory equation. Inventory Equation: Beginning Inventory + Purchases - Cost of Goods Sold = Year-End Inventory

What is end of year inventory of stock?

End of year inventory of stock is the amount of stock that a business has available at the end of its fiscal year. This inventory is used to calculate the value of the company’s stockholders' equity and is reported in the balance sheet at the end of the fiscal year.

Is a year-end inventory count required?

Yes, in most cases, a year-end inventory count is required. Depending on the type of business and accounting system used, the required inventory count may vary. Some businesses may be required to perform a full physical count of their inventory, while others may not. It is recommended to consult with an accountant for more information about any specific requirements for a year-end inventory count.