With new social distancing restrictions in place as a result of the coronavirus outbreak, many organizations are left to wonder how they’ll complete scheduled inventory counts. It may be time to get creative.

COVID Accounting Guidance

Counting Inventory During a Pandemic

  • Rick Krueger
  • 3/25/2020

Key Insights

  • Determine an accurate inventory count to allow you to make better business decisions
  • Review how business priorities may need to shift during the coronavirus pandemic
  • Explore what alternatives may be available for your inventory counting process

As the coronavirus (COVID-19) pandemic continues, many organizations have questions about their inventory counting process — including cycle counts that normally occur throughout the year and full physical inventory counts for March and April fiscal year-ends. Their concerns include how to complete necessary inventory counts amid challenges with reduced staffing, the shutdown of “nonessential” businesses in certain geographies, a desire to reduce expenses, and how to coordinate with the auditor.

These are all important issues requiring a thoughtful response.

What is the purpose of an inventory count?

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Before diving into our options, let’s remind ourselves why we count inventory. Businesses count inventory for two reasons.

  1. Most important, inventory accuracy directly impacts operations and financial results, including purchasing decisions, production, sales decisions, customer expectations, and revenue. Every one of those is vital to your organization’s success.
  2. Inventory is a valuable, semi-liquid asset, and it’s important for management, owners, lenders, and other stakeholders to understand that value.

How might priorities shift during the COVID-19 pandemic?

In addition to the health crisis, COVID-19 suddenly thrust a number of new economic priorities to the top of our list. We are concerned about our employees’ health. We are concerned about our supply chain and logistics. We are concerned about the impact of “shelter in place” orders. And then there’s the impact to sales orders, receivable collections, and cash flow.

With the environment rapidly evolving, it is completely appropriate for our priorities to shift. Although the accuracy of inventory is important, the following may be higher priorities:

How we can help

We can help you review these new priorities and identify strategies to address them, as well as collaborate on a new plan for the inventory counts. Some inventory count options that we can discuss in more detail include:

  • Deferring the inventory counts to a later date
  • Increasing reliance on cycle counts
  • Discussing with lenders if they would accept other levels of assurance besides an audit
  • Considering safeguards against COVID-19 for counters and observers
  • Exploring other inventory counting options, such as virtual observations

Please contact your CLA representative anytime for more information. We’re here to help you through this complex, rapidly changing environment.

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  • Rick Krueger
  • Principal