Cycle count

Definition

Counting a slice of the warehouse on a rolling schedule instead of the whole of it once a year.

Why It Matters

It is the cheapest signal there is about whether a balance sheet has ever been tested. A house that counts a slice of the warehouse every week finds its errors while they are small and knows what its stock is worth on any given day. A house that counts once a year, or has stopped counting, is quoting a number nobody has checked. Ask when the last full count happened, what adjustment it produced, and whether anybody is authorized to write something off without the owner in the room.