What is a Physical Inventory?

Physical Inventory is a process where a business counts and records every item in their warehouses. Any differences between the results from the physical inventory and the accounting are further investigated and the necessary adjustments are made.

Why perform a Physical Inventory?

The reason to conduct a physical inventory is to ensure that inventory accounting records are accurate. Having an accurate measure of what is in stock makes the business more profitable by preventing out-of-stock situations, improving customer service, and providing a more accurate picture of the current state of your business.

How do I perform a Physical Inventory?

1. Count Sheets

A count sheet is a document containing the product description, stocking location, quantity and sometimes the price.


Item/Part #





Factory brand alloy wheels

Basement - C300



Sport steering column

Basement - C157



17 inch tires

Warehouse 2 - A25



SUV Windshields

Warehouse 1 - A55



DVD Players

Main building - 105B






To download a template, click on the Physical Inventory Count Sheet Example


2. Bar Code Readers

Eliminate the need to manually count every product on the shelf and manually enter the data into your accounting software. The user simply scans the barcode on each product, and once finished, uploads the entire inventory set straight to the PC. This approach is less time consuming and more accurate than manual approaches.

For more information on physical inventory:

Physical Inventory Procedures
Wikipedia – Physical Inventory
Physical Inventory Count Sheets and Count Cards Overviewiness.

ROI of using Barcode Readers for Physical Inventory

Studies have shown that leveraging bar code readers to perform physical inventory is far more cost effective and significantly reduces error. Depending on your internal inventory recording process, utilizing bar code technology can enhance productivity anywhere from 25% to 75%. The charts below provide a detailed analysis of gains in annual hours and dollars based on the number of products in inventory and the productivity improvement. It assumes that the physical inventory is conducted annually.

Resource Gains with 25% Productivity Improvement

Resource Gains with 50% Productivity Improvement

Resource Gains with 75% Productivity Improvement

 Easy to Use Hand-held Interface

 Does not require desktop client

 Integrates with third party ERP/POS software

 Modern User Interface

 Configurable rules enable high accuracy

 Runs on Windows Mobile 6.0 and 6.5

 Powerful Feature Set

 Easy to Install

 Enhance business profitability

 Increase employee productivity

 Improve accuracy of inventory counts

 Increase customer satisfaction

 Better planning and forecasting