Monthly Inventory Count Sheet

How to count efficiently

Count one section at a time with a clipboard, pen, and a printed copy — never your phone. Looking at expected quantities while you count creates anchoring bias (you "see" what the sheet says is there). Better practice: count blind, write actual on the sheet, then transcribe variances after.

Count high-velocity items first while focus is sharp. Skip nothing; an unchecked item in the count sheet is worth less than a guess. If you find an item that is not on the sheet, add it to the bottom — that is data the inventory system needs.

What the variance column tells you

A variance of 0 means the records match physical reality. Small consistent variances (under 2% per item) usually indicate counting noise or rounding. Large positive variances (more on hand than expected) often indicate a missed receipt — a purchase that arrived but was not logged. Large negative variances flag shrinkage, damage, miscounts on production runs, or theft.

Patterns matter more than single counts. Variance on the same SKU two months in a row points at a process problem: your purchase log is missing entries, your production runs are not decrementing materials correctly, or the SKU is mis-labeled in storage. The count sheet does not solve these — it surfaces them so you can fix the upstream cause.

How often should I count inventory?

Monthly is the default for most makers — frequent enough to catch shrinkage and miscounts before they compound, rare enough to stay sustainable. High-velocity SKUs and high-value materials warrant weekly spot counts. Above ~150 SKUs, switch to cycle counting (10% of SKUs per week on a rotating schedule) so the time investment stays manageable.

What is the difference between expected and actual inventory?

Expected is what your records (spreadsheet, software, or ledger) say should be on hand based on starting balance + purchases − sales − production usage. Actual is what is physically on the shelf when you count. The difference is variance, which captures shrinkage, miscounts, missed receipts, and production yield discrepancies.

Should I count raw materials and finished goods separately?

Yes — always. Raw materials, finished goods, and packaging follow different valuation rules (raw at purchase cost, finished at production cost, packaging as supplies expense), different reorder logic, and different counting cadences. Mixing them on a single sheet is the most common cause of unreliable inventory totals at year-end.

How do I document inventory shrinkage?

When a count comes up short with no obvious cause (no broken item, no missing receipt), document the variance on the count sheet, sign and date it, and file it. For tax purposes, shrinkage reduces ending inventory (and therefore increases COGS), so the documentation supports your COGS deduction. The audit trail matters more than the dollar amount.