When managers conduct an actual count of the items held in their storage areas, they are taking a physical inventory. A physical inventory is a count of all the inventory items on hand at a specific point in time. It is used to verify the accuracy of the inventory records and to identify any discrepancies.
Physical inventories are typically conducted on a regular basis, such as once a month or once a quarter. They can also be conducted on an ad hoc basis, such as when there is a significant change in inventory levels or when there is a suspicion of theft or fraud.
There are a number of different methods that can be used to conduct a physical inventory. The most common method is to count the items by hand. However, there are also a number of software programs that can be used to automate the process.
Once the physical inventory is complete, the results should be reconciled with the inventory records. Any discrepancies should be investigated and corrected.
Physical inventories are an important part of inventory management. They help to ensure that the inventory records are accurate and that the company has a good understanding of its inventory levels. This information can be used to make informed decisions about purchasing, production, and sales.