Year-end inventory count preparation for QuickBooks Online

Preparing for a year-end inventory count is mostly deciding things before count day, because the count itself is one pass through the warehouse against one cutoff. Four decisions carry most of the work. You settle what to agree with your accountant, how your books in QuickBooks Online stand at the cutoff, how the warehouse and the people are ready, and what happens to a difference nobody can explain.

The procedures live in other guides. The physical inventory count checklist is the tickable list for count day, and how to do a physical inventory count walks through the process. The books side is covered in year-end inventory count in QuickBooks Online, and why physical counts still matter is for the reader who doubts a full count is worth the effort.

Settle these with your accountant or auditor

Bring these questions to your accountant before count day:

• Which date will the adjustment carry? It is usually the cutoff.
• Will an outside auditor observe the count or make test counts of their own, and which documents do they want to see?
• If your books are locked, who can reopen them, and when?
• Is any of your inventory held by someone else? Count it, or get the holder's confirmation, as of the same date as the rest. Is anything in your warehouse held for someone else? Keep it apart, mark it, and ask your accountant how to treat it.

Auditors do different things at a count, so ask rather than assume. Thompson Greenspon, an accounting firm, notes that an auditor may observe the count and may perform independent counts. The firm adds that you should have invoices and shipping and receiving reports ready for the cutoff.

RKL, another accounting firm, suggests giving the auditor the count instructions issued to inventory personnel, or compiling a memo of the protocol. Either way, write down the instructions you will hand your counters. Then you have something to show.

When a transaction is dated on or before the lock date, QuickBooks Online either gives a warning or asks for a password, depending on your settings. Find out now who can reopen the books, because the adjustment may land on a date inside the locked period.

Ask your accountant whether your year-end figures need a full count, and whether cycle counting would be enough for your business. You can read about the practice in cycle counting and in cycle counting vs physical inventory count. The answer for your books is theirs to give.

Settle the cutoff and what the books show

The cutoff is the date and time the count describes. Name the last receipt and the last shipment entered before it, and decide who enters nothing in QuickBooks while the count runs. A receipt or shipment that happened before the cutoff but was entered after it is a late entry, not an error in the count.

Look at items that are already below zero before count day. Intuit says that if the quantity on hand is less than zero, you have negative inventory. Ask your accountant what to do about each one, because a count will not explain a quantity that was entered wrongly.

QuickBooks Online does not track inventory by location within a warehouse, and Plus and Advanced keep one quantity on hand per item. That means your count sheets, not QuickBooks, are the record of which locations were counted. The guide to QuickBooks inventory locations on count day shows how to keep that record.

Get the warehouse ready

Give every location one name, and use that name on both the sheet and the label. Group locations into zones, usually by aisle, so each pair of counters has a clear stretch of the floor. The same item can sit in aisle 4, rack B and in the overflow zone, and those are two locations with a line each on the sheet.

Tidy so every item is in an identifiable place. Separate what you will not count as stock, such as returns not yet inspected, vendor holds and damaged goods, and decide where each will be counted or written off. Then walk the premises for stock outside the warehouse floor, such as an overflow zone, a returns zone or a mezzanine.

Set aside anything that arrives while the count runs, so it cannot mix with counted stock. Run through the plan once with the people who will count, because a dry run shows the unclear label or the missing location while it is still cheap to fix.

Choose who counts, who recounts and who decides

Name the counters, a second person for recounts, and a supervisor who holds the book numbers. Name the manager who approves a difference too, so nobody has to find that person on count day.

Prepare blind sheets, which list each location and item but leave the quantity blank, so the counter never sees the book quantity. Brief your counters on how to mark an empty location and what to do with an item that has no label.

Decide when a recount happens, and state the trigger as doubt. The supervisor doubts a result, or a counter notes something odd about a location or an item. A blind sheet shows no difference, so the trigger cannot be one. A recount counter gets a fresh blank sheet and is shown neither the first count nor the book number.

Decide now what happens to a difference you cannot explain

Agree before count day how an unexplained difference will be handled. It goes on a variance list, and someone checks for transactions that were never entered or were entered with the wrong date. A different counter recounts the location blind if the supervisor has doubts, and only then does anyone propose an adjustment.

Do not book a difference as a loss or as shrinkage until that check is done. The check comes first and the adjustment second, because a late receipt looks exactly like a shortage until you find it. The way to work through the list is in how to reconcile variances after a physical count, and the hand procedure is written out in QuickBooks Online inventory limitations.

These decisions need a written home. If your company shows an Inventory counts option under Products and services, Intuit's instructions have you enter quantities in a New Quantity column. Those instructions have no step for recording a location, assigning a counter, recounting or approving a variance, so write those rules down yourself.

Where Count fits

InventoryWare Count records every counted quantity against a location. An item's counted total is summed across the locations in the count plan, so the plan holds the record that QuickBooks does not.

InventoryWare Count is built for one complete physical inventory count, and posting adjustments to QuickBooks from a partial count is not available.