Ok so over the next several blog posts we will be looking at stocktaking, yes I know it might be more interesting to watch paint dry but I’ll do my best to keep it simple and try to make it a bit more interesting.
What is a stocktake I hear you asking:
A stock take is the process of counting and checking all products, goods or stock a business owns and turning it into a report. It allows businesses to keep accurate and correct records and to work out the value of their trading stock.
Why do you need to know the value of your trading stock you might be wondering, well all businesses must account for the value of their trading stock at the end of the income year – your closing stock. The frequency of stocktake varies between businesses, with some preferring once or twice a year, while others prefer quarterly or monthly counts. You should do what feels right for you - there is no right or wrong.
Why is stocktaking so important?
The answer is it is not important, it is essential to your business. It identifies variances and issues with stock management and areas you need to improve to make your business more profitable.
Carrying out a regular stocktake allows you to:
• Better understanding of stock levels
• Ensures you are not holding to much or took little stock
• Identify stock you need to purchase
• Improve cash flow by identifying and reducing slow moving stock
• Detect theft or gaps in your stock levels
• Helps in reviewing your pricing structure
• Ensure your business is meeting its targets
• Identifies variances and issues with stock management
There are several different stocktake methods out they are but the most popular are:
• Periodic stocktaking – an inventory method that happens at the end of an accounting period or on a set periodic basis. This method will help you effortlessly keep up-to-date records of either your inventory or costs of goods sold.
• Spot checks are scheduled (and sometimes random) manual checks on stock or cash in tills. They can allow you to make sure there are no discrepancies between what your software thinks you should have and what is actually there. These are also good to do if you think theft is occurring.
• Continuous, perpetual stocktaking is done throughout the year at a few different points.
• Stock out validation happens when stock levels have become dangerously low.
• Annual stocktaking is done in the last month of the financial year. In some circumstances, it may require premises to close for a few days
To carry out the stocktake yourself or hire a company to do it for you?
I won’t lie to you stocktaking can be a massive undertaking especially if you are a small or new business. There are a lot of stocktaking companies out there, but the question is are they worth the cost, below is a list of pros and cons for hiring and external company.
• Account managers and stocktake staff are fully trained in all equipment and do this for a living. Basically, they are stocktaking experts, whereas your employees may not be
• Due to the level of expertise, you can expect to see more accurate results with a stocktaking service
• Stocktaking services will not just dump you with the data - they take you through the whole process, including analysis and auditing. This is great if you struggle with reporting and finding key insights
• Stocktaking services generally provide you with all the equipment you may need, including PDA barcode scanners and any other necessary tools
• A good service will typically appoint a stocktake manager, who will manage all their staff, so you won’t have to get involved if you don’t want to
• Many companies provide software to link up to scanning equipment and reporting data
• If stocktake training is offered, you can have your employees trained so you do not have to hire a company the next time around.
• Cost is often prohibitive for some business owners
• Lack of involvement means you will not know your stock situation inside-out (this is, of course, avoidable if you work alongside the company in a prominent role)
• Some business owners feel that the lack of specific stock knowledge can be a disadvantage when stocktake is outsourced
• If you dislike the company you hire and decide to discontinue, the next stocktake you complete may have software clashes if the next company does not use the same program or equipment.
Any questions, queries or comment feel free to get in touch we are happy to help.
Look out for our next blog on preparing for a stocktake