How often should a small business do inventory?

A small business should conduct inventory counts regularly, using a cycle counting approach rather than an annual comprehensive count. Cycle counting involves checking small portions of inventory at different intervals: monthly for top-selling items, quarterly for mid-tier products, and biannually for slower-moving stock. This method ensures that high-value and fast-moving items are monitored more frequently, minimizing the risk of costly discrepancies.

While a full inventory count is still necessary, typically once a year for accounting purposes, relying solely on annual counts can allow errors to accumulate unnoticed. Cycle counting helps identify and correct discrepancies early. Additionally, immediate spot counts should be conducted when unexpected stockouts occur or when incidents of theft or damage are detected, as these situations indicate a mismatch between actual inventory and records.