Why is it important to conduct physical inventory counts?

Conducting physical inventory counts is vital to ensure that the actual items on hand match what is recorded in the inventory management system. This process helps to identify any discrepancies, such as theft, loss, or misplacement of items. By verifying the stock levels, organizations can maintain accurate inventory records, which are crucial for effective decision-making, financial reporting, and operational efficiency. Accurate inventory counts also support better forecasting and help ensure that enough stock is on hand to meet customer demand without overstocking, which can tie up capital.