Key Recommendations for a Successful Stocktake
As a business’s financial year approaches preparations will begin for their 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 would be carried out regularly, however some businesses choose to do so only at their year end. We have been asked recently by our clients to outline our suggestions and recommendations for carrying out a stocktake. We have outlined below some suggestions which we hope you may find useful.
Why Conduct a Stocktake?
While some may feel that stocktaking is a necessary evil there are a number of advantages to conducting a regular stocktake for your business, such advantages include:
- Improved Cashflow – cashflow can be improved by identifying slow moving stock items and therefore reducing the level of such stock held.
- Accurate Profit Margins – regular stocktakes enable you to accurately monitor profit margins across a range of products.
- Identify Slow Moving Stock – regular stocktakes will also identify items of stock that are slow moving and allow you to make decisions on such items, such as selling at a discounted price.
- Improve stock management – having a better understanding of your stock levels will enable you to minimise waste and will allow you to identify if you have a problem with theft.
Suggested Method for completion of a stocktake
1. Plan Ahead
Before you commence your stocktake it is important that you 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 that the following are ready for your staff members:
- Hand Held Scanners, if applicable.
2. Organise Staff
While some companies may use external stocktakers, it can be beneficial to involve your staff in stocktaking procedures as it will help them to gain 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. It is also important that noise and conversations are minimised during a stocktake, as distractions from mobile phones, music or the radio can lead to errors in counts. It is also good practice to clearly mark items that have been counted, so as to avoid duplication and to identify items which may have been missed in error.
3. 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. 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 stockrooms 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 so they can be either valued at a discounted price or removed from the stock count completely.
4. Value your stock correctly
Once you have counted and verified your stock levels it is important to review price lists to ensure you have the most up to date prices for the stocktake and that all recent price changes have been taken into account. Another aspect to be considered when valuing stock is to identify the lower of the cost of the item or the actual selling price of the item, as stock should be valued at the lower of both. 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.
5. Get value for you stocktake
Now that your stock has been counted and priced correctly it is important that you get the best value from the information gathered. You will need to review the 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 theft which may be occurring within your business. Regular stocktakes will also assist you in streamlining your warehouse procedures and allow you to deal with stock issues in a more efficient and effective 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. It is important to remember that stock equals money. 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.