The Physical Inventory Count Module can be used to perform cycle or partial counts, WIP counts, or full inventory counts. The primary difference is that for full counts, you must be sure to run the Items Not Counted report and review all items that do not appear on count sheets, both before and after the count.

The steps required to perform a full count are:

• Set up count card.
• Configure count sheets.
• Disable inventory transactions (optional). If counting WIP, consumption entries must not be done during the count.
• Generate the count sheet lines from configuration.
• Ensure all expected items are on count sheets by running the Items Not Counted report with appropriate options.
• Print count sheets.
• Count inventory.
• Enter the count from the printed sheets into the Count Worksheets interface.
• Ensure all items in the count sheets have values entered for them.
• Analyze the count differences to minimize count errors.
• Once validation is complete, copy counted inventory to the Journals.
• Run the Count Module’s Item Journal Test Report to validate journal entries.
• Post the Physical Inventory Journal entries.
• If WIP was counted, post the Consumption Journal entries.
• Re-enable inventory transactions.
• Run the Parts with Modified Shelf No’s report to review any potential changes to item shelf numbers. Manually adjust the Shelf No field where required.

From the Inventory Counts list page, click the New button to insert a new count card.
Enter and review the required information as described in the sections below.

The General FastTab allows you to set the general or basic information for an inventory count, and to review the current count status.

The Posting FastTab provides default settings for when the count is transferred to the journals. Some of these defaults can be overridden when running the “Copy Count to Journals” routine. To properly post the count, you need to specify the appropriate options and journal batch names here.

In order to record inventory, you must configure at least one count sheet in the module.
However, it is easier to configure several different count sheets to logically group or organize the inventory counts.

The most common groupings are by bin number, shelf number, or item number. For example, finished goods may be grouped separately from raw material or purchased parts, depending on how you organize the count teams.

Users also have the ability to drill down directly from the Count Sheet.

Configuration page to specific count sheets. This enables the use of Dynamics 365 Business Central Security Filters to limit users to specific sheets, locations, etc. The Counted Status Filter (flow filter) can also be used to limit the view in count sheet configuration to only counted or uncounted lines.

The following fields are used to configure count sheets:

When doing a full count, the WIP will likely be counted at the same time. This helps ensure that those items that have been consumed physically but have not been consumed in NAV, are not missed.

To count WIP, simply include a separate sheet for WIP and checkmark the WIP Only field. No other filters are required and all WIP is added to this single count worksheet. WIP count sheets can be printed later by either Production Order or by Work Center.

Once the count sheets have been configured, use the Generate Count Sheets function on the Count Sheet Configuration page to create the count sheet lines:

The Generate Count Sheets report allows you to select a count sheet to generate, and provides several options:

When performing a full count, the Sheet Name filter should be empty. The generation options are:

The Count Sheet Lines page allows you to view either all count sheet lines or by count sheet name. When entering the count, you normally use the View by Sheet Name option in order to type in the count as it appears on the printed sheets.

By turning off the View by Sheet Name option, all lines can be viewed. This is useful when locating a specific tag number or part number regardless of the sheet on which it appears.

The following fields are available in the page:

The count sheet configuration must be validated before printing and distributing the count sheets. The primary purpose is to ensure that all applicable items are actually on the sheets.

To find out which items are not on the count sheets, run the Items Not Counted report. This report is run from either the Print button on the Count Sheet Lines page or from the Dynamics 365 Business Central menu.

This report can be run multiple times until all items have been accounted for on the count sheets. The first pass is done generally to view those items that have inventory and are not being included on the sheets. To do this, run the report with the Include Only Items in Stock option set. Location and variant filters may also be specified.

See Appendix A for all report options.

If any items are identified that are not on count sheets but should be, there are three
options:

• Modify the count sheet configuration and regenerate the count sheets. This option is best for wide-ranging changes, such as adding a new filter to the count sheets.
• Re-run the Items Not Counted report with the proper filters for the missing items, and specify a sheet to which the items will be added – use the Add Items to Count Sheet option on the report.
• Manually add the missing items to the count sheets.

Unlike Dynamics 365 Business Central’s Calculate Inventory function on the Physical
Inventory Journal, the Count Module does not take a snapshot of the current inventory levels. This means that any changes to the on-hand quantity in Dynamics 365 Business Central are reflected on the count sheets when the count is entered (except when using the As of Date filter).

This behaviour may be desirable or undesirable, depending on how the count is conducted. For example, assume there are four of item number ABC123:

Scenario 1 (undesirable):

• You count 4 on the shelf
• You enter 4 into the count sheet
• Sometime after you counted the 4, you post the sale of one ABC123
• The difference between counted and inventory is now 1
• After you post the inventory adjustments, the Dynamics 365 Business Central inventory will be 4, when it should be 3

In this scenario, ensure that all transactions are also reflected in the quantity on the count sheet.

Scenario 2 (desirable):

• Sometime after you generate the count sheets, you sell one ABC123
• You count 3 on the shelf and enter 3 into the count sheet
• The difference between counted and inventory is 0, which is correct

Ideally, all inventory transactions should be prevented until after the inventory count has been transferred to the Dynamics 365 Business Central Physical Inventory Journals. If the transactions are not disabled, ensure that the count sheets are updated with any item transactions that have occurred since the count.

Although the Count Module does not take a snapshot of inventory, you can use the As of Date field to control differences and post adjustments based on a specific transaction date. This allows you to continue doing Dynamics 365 Business Central transactions in the system yet still post the differences based on the date the count started. When using this function, all transactions must be posted after the As of Date.

To set a filter for the as of date, use the syntax “..[date]” where [date] is the as of date, for example: “..09/01”.

Once all required items have been confirmed to be on the count sheets, paper copies can be printed. There are three types of count sheets available for printing:

• Physical inventory sheets, which do not include WIP or production order components,
• WIP sheets, grouped by production order, and
• WIP sheets, grouped by work center.

For a full count, both the physical inventory sheets and WIP sheets need to be printed.
To print physical inventory sheets, use the Inventory Count Sheets report from either the Print button on the Count Sheet Lines page or from Dynamics 365 Business Central menu:

The count sheets are normally printed all at once; however, the report allows users to print the sheets individually.

WIP sheet printing can be grouped either by work center or production order. The choice of which to use depends on the accuracy of the completion information for the production order routings; this is the Routing Status field in the Prod Order Routing Line table.

If the routing statuses are up-to-date, the Count Module can determine which work centers a production order is at, and print the count sheets in that order. If parallel routings are being used, the production order may be shown at multiple work centers. The Routing Link Code field is not used, so all material for the production order is displayed for each work center the production order appears at.

To print count sheets grouped by work center, run the Print WIP Count Sheets. If the report cannot determine a valid work center for a production order, it uses the default work center defined in the options of the report.

Where the routing statuses are not up-to-date, another option is to first identify the production orders that need to be counted and print only those orders. One method of doing this is to walk through the facility before the count and record the production order numbers that are on the floor and the order in which they occur. Once the list of the production orders is ready, the Print WIP Sheet by Prod Order report can be printed, one production order at a time.

Another option is to simply print the report without filtering on a production order to generate sheets for every production order on the count sheets.

Once the sheets have been printed and the actual counts have been written on them, the count must be entered. Multiple personnel can enter the count simultaneously, either on the same or different count sheets.

The standard method of entering the count is to simply open the required Count Sheet Lines page and enter in the quantities line-by-line.

You may modify the shelf number for those items where the count personnel have indicated changes on the sheets. However, if the count personnel have indicated that the item number, location code, bin code or variant code have changed, do not change them on the count line. Simply enter a quantity of zero for the line and add a new line with the updated information.

For written-in values, add a new line at the end of the count sheet. The system automatically assigns a Tag No, or one can be entered manually if the count personnel have already tagged the physical inventory with a number.

WIP is entered in the same manner as other count sheets, except that a production order number must be specified if additional write-in lines are added.

If no value is entered for a production order item that has not been consumed for a work order, no inventory adjustments are made.

After all counted quantities have been entered, they must be validated. There are three validations that must be performed:

• Ensure all on-hand inventory has been counted;
• Ensure all lines on count sheets have had a quantity entered against them, even if the quantity is zero; and
• Confirm the counted quantities for inventory that is different than expected.

Use the Items Not Counted report to check for items that have on-hand inventory that does not appear on the count sheets. This is the same procedure as in the Using the Items Not Counted Report section. Run the report with the options shown below. See Appendix –A.1 for all report options.

Items that appear in this report, and are identified as “Not on Count Sheet,” are not adjusted when the inventory is posted.

Uncounted items can be added to a specific count sheet by filling in the Add Items to Count Sheet field with a valid count sheet name. If this is done and no count is entered for the items, these items will be adjusted to zero when the count is posted.

During data entry, it is possible that an entry clerk may accidentally skip a line of entry. In the Count Sheet Line page this results in the line staying red, indicating that no value has been entered. Either scroll through all lines looking for those in red or run the Items Not Counted report to locate those lines with missing values.

To use the Items Not Counted report, set the report options shown below. See Appendix A.1 – for all report options.

The primary task after inventory count is to validate the differences between what is expected to be in stock and what was counted. The Counted Inventory Differences report provides the data required to analyze the count differences.

The Counted Inventory Differences report allows the user to view differences in regular inventory and in WIP. The following options provide a summary report of all count differences, sorted by inventory value:

The report options can be set to show more detail if required and can be filtered by specific item numbers. See Appendix A.2 for a full list of report options.

If there are changes required in the counted quantity entered, simply edit the count sheet to reflect the actual quantity.

The Show All Inventory option of the report shows the total adjustment to inventory, including any adjustments as a result of WIP adjustments.

If the Show WIP Difference Only is specified, the report displays the total difference in WIP only. This difference is offset by differences shown when the report is run with Show All Inventory.

After the serialized missing items have been identified with the Counted Inventory Differences report, the item ledger entries can be retrieved using the Missing Serial No Details report providing transactional details which can assist in understanding why the serial number was not counted.

The report can be filtered by count sheet information such as item number, location code, and count sheet name. See Appendix A.3 for a full list of report options.

After the Counted Inventory Differences report has been run and the item differences identified, it may be determined that recounts are necessary. To facilitate this process, the users can either multi-select items and add them to recount sheets or use the Generate Recount Sheets function.

The Recount functionality improves the ability to locate and flag items for recount with its ability to identify items to be recounted based on threshold criteria.

The Count Module does not directly post any entries. Instead, it transfers the count entries to the existing Dynamics 365 Business Central journals, specifically to the batches defined on the Posting FastTab of the Inventory Count Card.

Once the entries have been transferred, use the standard Dynamics 365 Business Central posting functions to update inventory.

When preparing to transfer the count to the Physical Inventory Journal, the module sums all the count quantities for each item using the Calc Differences as of Date, and then calculates the difference based on this date.

When preparing to transfer the count to the Consumption Journal, the module sums all the differences for each item that has a production order defined on the line. Any adjustment to consumed WIP is offset with an equal adjustment to physical inventory. See the following tables for examples.

The following table shows the main fields used when calculating inventory, along with some sample data as it would appear in the Count Sheet Lines page. As shown, in many cases the Difference field on the individual count lines does not represent the true inventory difference. The Counted Inventory Differences report can be used to view the total differences for each item. See Appendix A.2 for details.

The total adjustment for item ABC123 would be 0 (1+5+4 matches the 10 on hand), and there would be no Consumption Journal entries.

The total adjustment would be -4 (6 counted, 10 were supposed to be on hand).

The total adjustment would be +2 (12 counted, 10 were supposed to be on hand)

Physical inventory for DEF456 will be adjusted by 4, since 4 were counted.

However, a consumption entry will be made for production order 1001 for those 4. The net effect on physical inventory (On-Hand Quantity) is 0, but WIP inventory will increase. For the stock level of DEF456 to be adjusted, it must also appear elsewhere on the count sheets without a production order (see example 6).

The total difference for GHI789 is -1, since 4 were counted, but the production order had consumed 5. A Consumption Journal entry will be made for -1 to remove one from the production order. However, a Physical Inventory Journal entry for -1 will also be made.

The Physical Inventory Journal entry is made to offset the result of the consumption journal entry. When removing 1 of GHI789 from the production order, Dynamics 365 Business Central increases inventory by 1. However, counting fewer items on the production order does not automatically mean that inventory is higher. And if inventory was higher, then the extra GHI789 would be counted somewhere other than with the production order. See the next example for an illustration of how this would work.

The inventory count must be transferred to the standard Dynamics 365 Business Central journals for posting. To do this, run the Copy Count to Journals function:

The following options can be set for the transfer:

The Count Module provides an enhanced test report – the Item Journal Test Report – that can be used before posting to ensure all journal lines are valid so that the posting routines do not fail. The report is available from the Dynamics 365 Business Central menu or, when the journal templates are properly configured, from the Physical Inventory Journal. To configure this report as the default test report, use the Item Journal Templates page.

The Insight Works test report checks for various errors that could occur during posting, including missing tracking lines, blocked items, and others.

The test report can be set to either display all lines or only the lines with errors.

When the As of Date is set, differences can be posted with a specific as of date rather than the current work date. This allows users to perform inventory transactions during the count that are then not included in the difference analysis or journal transfer.

After the count has been copied and the transfer validated with the test report, you must post the various item journals in this order:

• Physical Inventory Journal
• Warehouse Physical Inventory Journal
• Reclass Journal
• Reclass Journal
• Consumption Journal

Until all journals are posted, the inventory value may not be correct.

Once the journals have been posted, re-enable the ability for users to post transactions.