For many companies the business year will end on December 31st. An integral part of the closing process is the tedious and time-consuming annual physical inventory. Having only endured a few of these, I have the following suggestions to help make the process a little smoother. Send notifications to all relevant parties Notify your suppliers that you will not allow deliveries while physical inventory is in progress. Place a "non-delivery" notice on your purchase orders. Inform all transportation companies that regularly serve your facility of your delivery and shipping restrictions. This will allow them to use their time more efficiently and they will appreciate your cooperation. Notify your auditors or accountants and arrange for their staff to verify the count. Notify your sales people and customers of the closed or non-shipping period. Post a deadline for placing orders to ship before the close. Inform your employees far enough in advance to avoid conflicts with the vacation schedule. This will also allow them to incorporate the activities into their regular work schedules. Print and distribute a schedule of all activities planned during the physical inventory. Make sure it is listed who is responsible for each task. Do some cleaning Clean the warehouse area (sweep and remove all rubbish). Straighten inventory items for easy counting and ensure each item is contained in its assigned location. If possible, avoid storing similar items in adjacent locations. Make sure all items are clearly identified. Consolidate all quantities for the same item to reduce the number of items where possible. Combine quantities into larger units for easier counting (e.g. stacks or packs of 20). Make sure all storage locations are permanent and clearly marked. Identify damaged goods and move them to a designated location or return them to the seller for credit. Identify obsolete inventory and move it to a special storage location. Dispose of it as soon as possible to eliminate storage and monitoring costs. Dust, spoilage, last year's inventory tags, and/or cobwebs are telltale signs of obsolete or excess inventory. Have counters record these observations on tally sheets for further review and action once the physical inventory is finished. Update warehouse plans with precise storage locations. Determine what should not be counted, such as warehouse equipment, packing supplies, and miscellaneous items not in inventory records.