Maintaining an accurate parts inventory is critical for dealership profitability. While most dealerships conduct an annual physical inventory, relying solely on a once-a-year count can leave you vulnerable to errors, theft, and accounting discrepancies. So, how often should you actually conduct a physical inventory?

The Minimum: Annual Physical Inventory

A full parts physical inventory should be conducted at least once per year. This ensures that your DMS (Dealer Management System) inventory matches what’s physically on the shelves and aligns with your General Ledger (GL).

Why it’s necessary:
✅ Identifies shrinkage, missing parts, or misplaced inventory
✅ Uncovers accounting discrepancies between the parts department and accounting
✅ Provides a fresh start for inventory accuracy

Pro Tip: Dealerships that use a third-party inventory service like PartsCount get an unbiased, accurate count while freeing up staff to focus on daily operations.

Monthly or Quarterly: Cycle Counting for Higher Accuracy

Cycle counting involves counting small sections of your inventory on a rotating schedule instead of waiting for a full annual count. Dealerships with high inventory turnover should aim for monthly or quarterly cycle counts.

Benefits of cycle counting:
✔ Prevents large year-end discrepancies
✔ Reduces the risk of inventory losses going unnoticed for months
✔ Keeps inventory more accurate throughout the year

💡 Best Practice: Count high-value and fast-moving parts more frequently since they are more prone to errors.

Daily: Spot Checks & Reconciliations

Some inventory discrepancies happen in real-time due to misplaced parts, receiving errors, or billing mistakes.

✅ Daily reconciliation of parts to the General Ledger (GL) helps prevent large month-end variances.
✅ Conduct spot checks on any part with frequent shortages or mismatches in the system.

🔍 Solution: Automated tools like PartsRec can perform daily parts-to-GL reconciliations, catching errors before they become major problems.

Final Recommendation

• Annual Physical Inventory: Required for accuracy, best done with an external service like PartsCount.
• Cycle Counts (Monthly/Quarterly): Essential for high-volume dealerships to minimize errors.
• Daily Reconciliations & Spot Checks: Best practice to prevent small issues from becoming major variances.

Want to improve your parts inventory accuracy? Contact us to schedule a professional inventory count today!