A large and imposing amount of time is required to count and value the inventory as a part of the closing process. This chapter reviews two methods for dealing with the issue: (a) creating an accurate inventory tracking system combined with cycle counting in order to avoid entirely the month‐end physical inventory count; and (b) considering several ways to shrink the level of on‐hand inventory, thereby reducing the risk that the inventory will be incorrectly counted or valued. The prime reason for using cycle counting is to locate the underlying problems causing inventory record accuracy, which typically results in a swarm of transactional errors that have to be fixed before the inventory tracking system will reliably produce accurate records. The main source of obsolete inventory is excessive purchasing volumes. The problem can be avoided with the use of just‐in‐time purchasing practices. The accounting, production, and engineering managers must determine the best time to effect the change that will minimize the old stock.