As the financial year end approaches for many businesses preparations will begin for the annual stocktake.
A stocktake is a physical count of inventory on hand and provides a business with an accurate reflection of stock held. It is advisable that stocktakes be carried out regularly, however some businesses choose to do so only at their year end.
We outline here some suggestions and recommendations for carrying out an efficient and effective stocktake.
Why Conduct a Stocktake?
There are many advantages to conducting regular stocktakes in your business, including:
Cashflow can be improved by identifying slow moving stock items thus reducing the level of such stock and working capital tied up.
Accurate profit margins
Regular stocktakes enable you to accurately monitor profit margins across the whole range of products for sale.
Identify slow moving stock
Regular stocktakes help to identify items of stock that are slow moving and change future stocking decisions.
Improve stock management
Understanding your stock levels will enable you to minimise waste and to identify if there is a problem with misappropriation or theft.
Suggested Method for Completion of a Stocktake
Before you commence your stocktake you should have a full understanding of the resources and time required, so as to reduce the level of interruption to your business. To minimise disruption to your business a stocktake should be conducted during the quietest time of the day, with most businesses conducting stocktakes outside of business hours.
As part of your planning procedures you should also ensure you have:
- A plan of how the stock count will be performed and controlled setting out counters and checkers and the overall objectives
- Stock sheets to enable a full systematic count of stock held
- Recording methods for stocktaking Pens / Calculators /Hand Held Scanners
While some companies may use external professional stock takers, it can be beneficial to involve your staff in stocktaking procedures as it helps them to gain an understanding of the importance of stock management.
When allocating teams for the stocktake you should always appoint a supervisor to each section and ensure all staff fully understand how the stock is to be counted. For example, it may be advisable to count from top to bottom and from left to right of the stock room, to avoid count duplications and have a systematic approach.
There should be one staff member counting stock items and another recording / checking. It is also important that distractions are minimised during a stocktake, and so closing off access to customers / deliveries should be done.
It is also good practice to clearly mark items that have been counted, to avoid duplication and to identify items which may have been missed in error.
Know what needs to be counted
Before you commence your stocktake you should identify all stock owned by your business, along with locations of where the stock is held (including stock held at third party premises and fulfilment centres).
Stock that has been invoiced to customers, but not yet dispatched and stock received but not yet recorded in your system should be isolated and excluded from the stock count. All stock areas should be laid out in a tidy and orderly manner to ensure it is easily accessible and arranged into appropriate categories.
Staff members should also be made aware of the requirement to identify slow moving, damaged or obsolete stock. It is important that these items are separately identified, and all fully counted. At a later stage they can be valued at a discounted price or fully provided against.
Value your stock correctly
Post stocktake valuation of the stock for accounts preparation will need to be reviewed. Stock should be valued for accounts purposes at the lower of the cost of the item or the actual selling price of the item (net realisable values). For example, you may have purchased an item of stock for €2,000 however due to changes within your market this item will now only retail for €1,200. In this case you should value this stock item at €1,200 as this is the lower of both the cost and the actual selling price.
Get value for you stocktake
Now that your stock has been counted and valued correctly it is important that you get the best value from the information gathered. You should review results of the stocktake to identify where improvements in stock management can be made. By understanding your stock levels and stock requirements you can easily identify and monitor slow moving stock, profitable stock and possible misappropriation which may be occurring within your business.
Regular stocktakes will also assist you in streamlining your stock handling procedures and allow you to deal with stock issues in a more timely manner.
Carrying too much stock or not having sufficient stock to meet customer demands can have a negative impact on the profitability of your business.
The introduction of regular stocktakes will give you more accurate information to allow you to make better operational decisions. Furthermore, if you conduct regular stocktakes throughout your financial year your staff will become more familiar with the procedures and stocktakes will be conducted in a more efficient manner.
If you have any queries ahead of your year-end stocktake or on conducting regular stocktakes throughout the year please do not hesitate to contact a member of our team, here, who can assist you.