Cycle Counting Inventory in Business Central


Cycle Counting is an inventory auditing procedure, which falls under inventory management, where a small subset of inventory, in a specific location, is counted on a specified day.


Cycle counting is different from tradidional pysical inventory counting, because that requires a counting of alle items at one time. This usually forces the operations to stop and requires heavy workforce.


Cycle counts can be done during daily operations, and are therefore more efficient. It also keeps the inventory accuracy at better level because there’s always measurement ongoing.

Not all items need to be counted at the same frequency, since there’s difference in items with high value, movement volume or items which are critical to the business processes. Therefore items should be classified (fast, normal, slow movers, or a,b,c etc).

By smartly planning Cycle Counting you can make analyzes of your inventory and make comparisons over the years. It also ensures that you are flexible and can consciously make choices in the when and how often counting season products.


Cycle Counting also faces some challenges:

  • It requires preparation from the office to make assignments for the employees who carry out the work. This takes time during the year, since every month, week or day something has to be prepared.
  • The accuracy of Cycle Counting can be a bit lower than an integral count. In order to maintain a reliable stock position, it is possible to opt for an integral count once every two or three years in order to be able to implement a correct stock position at the same time.
  • It is often chosen to carry out the Cycle Counts during the day. This has the major disadvantage that the customer can receive less help or that the employee chooses to help the customer so that he does not know exactly where he or she stayed with the count . In addition, products that have already been counted can be sold before the count has been processed (depending wether you keep count on paper or by Handheld)

Setting up Cycle Counting in Business Central

Cycle Counting can be done easy with Dynamics 365 Business Central. A few settings need to be done first to get this functionality working. This article describes Cycle Counting.

The following process describse the nessecary settings and the Cycle Counting process.

Click the Search Button, and search for Physical Inventory in the Search bar.

1. Define the Counting Periods in the Physical Inventory Counting Periods Page.

Figure 1. Setup of the Counting Periods

2. In the Item Card, Warehouse Tab, define the Counting Period.

Figure 2. Define the Counting Period
Cycle Count setup is done per item. It is not possible to add Cycle Counting periods to an Item Group and count all items within. However to setup Cycle Counting per Item can be done very easy by batch using RapidStart functionality.

Counting Items

1. Go to Warehouse –> Inventory –> Tasks -> Physical Inventory Journals (or search for it)

2. Select Actions –> Functions –> Calculate Counting Period

Figure 3. Select Calculation Periods

The Physical Inventory Item selection screen appears. On this screen all items are visible that have to be counted, based on the Counting Period, the Last Phys. Inventory Date.

3. Select the items you want to count and select OK.

Figure 5. Select the Items you want to count

The filter selections in the Item Selection screen are limited. You can only filter on Item No., Variant Code and Location Code. It is not possible to filter on a Bin for example. You can also directly export to Excel and make filters there.

4. Fill in the desired options, such as Posing Date and options like wether it should include items Not in inventory aswell, and clik OK.

5. After the physical counts have been completed, enter the ‘Qty. (Phys. Inventory)’ from the physical count. The adjustment quantity will appear in the ‘Quantity’ field. 

Figure 8. The Physical Inventory Journal after counting

6. Select Post. This will post the adjustment to the quantity on hand. This action results in new Ledger Entries as well.

The history of counting can be found directly from the Item History, in the Physical Inventory Ledger Entries.

Figure 9. History of Physical Inventory Ledger Entries

The Item Ledger Entries show the quantity adjustments as well.

Figure 10. History of Item Ledger Entries per Item

When you go back to the Item Card, you’ll find the Cycle Counting related fields to be updated.

Figure 11. The Item Card is updated

When you reopen the Physical Inventory Journal and calculate the Counting Periods again, the result shows (as expected) a much shorter list of items which needs to be counted.

Figure 12. Physical Inventory Item Selection is updated

Counting Inventory with a Handheld

It is possible to perform counts with a Handheld. A good Add-on for Dynamics 365 Business Central is Mobile WMS by Tasklet Factory. Mobile WMS supports both Ad-hoc counting and Planned counting. When using planned counting, the to be counted Batch can be send to the handheld. This also works for the Cycle Counting procedures.


  • This how-to also works with older Dynamics NAV versions
  • This works with all Locations settings
  • When working with Warehouse Management (Directed Put-Away and Pick) the workflow is slightly different, since you’ll use other Journals.

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