If you carry physical stock (including live stock) as part of your business, it is important to carry out a regular stocktake. A stocktake is essentially a physical count of the inventory currently held by your business so you know what products/items you have, how many of each, and the value of your current inventory.
A stocktake is essentially a physical count of the inventory currently held by your business so you know what products/items you have, how many of each, and the value of your current inventory.
Carrying out a stocktake is more that just ticking boxes (literally). If done accurately and regularly it can help you to identify missing or lost stock, check if your business is meeting sales targets, find improvements in your processes of stock handling and ordering, and identify high performing (and under performing) products.
At a minimum you should be doing this at the end of the financial year (us accountants need your stocktake results in order to complete your annuals), but we’d recommend carrying out a stocktake quarterly or every six months. One quick tip – if you have inventory valued at less than $10,000 in total, you don’t need to keep records or do a stocktake – but we’d recommend you do it anyway.
So, how should you do a stocktake?
Use the tools at your disposal
If you use an online inventory system, the first step is to run a report showing your current stock as recorded in the system. You might use an app or accounting add-on like Vend, or keep note of stock in an excel spreadsheet. And if you don’t report on and keep track of stock daily, that’s okay, your stocktake is a good time to start.
Record the right information
There are some key things that should be included in a stocktake. As a general guide, a spreadsheet like the following should cover what you need to record in your stocktake. This example just shows the basics, but you might want to add a column for notes, and comparison columns to show what the inventory system reported, how many items you physically counted, and the difference.
A note about value: When it comes to recording the value of stock on hand, make sure you record which ever value is lower between the item cost or what you could sell it for (net realisable value).
Make sure your stocktake is completed all at once
A stocktake is about documenting your inventory held at a single moment in time, so there is no point running a stocktake over multiple days, with stock being sold or used in between (especially if you have a high volume of stock turn over daily). For some retail businesses this means paying staff overtime and doing a stocktake after store hours. For others, it may be a smaller task that can be fit into the regular operation of the business.
Accuracy is key
There is no point in doing a stocktake without aiming for accuracy. Ensuring accuracy becomes more challenging as your business grows, and you hold a higher volume of stock. You might like to consider some of the following tips:
• Have a system of counting (clipboards, labelling counted items, starting from top shelves down, using barcode scanners etc) and stick to it. You might need to have counters working in pairs to double count stock and check accuracy
• Check the condition of stock as you count, and write-off any broken or unsellable stock as you go
• Separate stock that has been received and not yet recorded, as well as any stock that has been invoiced but not yet sent to a customer. Make sure they are counted separately.
• Don’t guess – count every item. That includes looking inside boxes and counting contents, rather than relying on labelling stating the volume in each palette or box.
Update your records
Once you’ve completed a stocktake, update your records to accurately reflect the actual stock your business has on hand. Record any discrepancies between inventory systems and actual stock so you have a note and can follow-up any concerning differences. Send your finalised records to your accountant as well as filing them as part of your own financial records.
Decide what you want to improve on
A good stocktake should give you some insight into your business. The stocktake process might highlight some better ways you could be recording and managing stock. Likewise you might gain insight into the performance of certain products. Use what you learn to make decisions that improve your business. Your accountant and business partner will be able to help you turn these insights into action.
If you have any questions please contact your RightWay accountant, email firstname.lastname@example.org or call 0800 55 024