Stock Taking

What is Stocktaking?

Stock taking (or stock counting) is counting on hand inventory that one business has at a specific time. This action will accured at the end of the specific periods, and at the end related controlling documents of surpluses and shortges will be generated based on financial needs.This action is vital and an integral part of the inventory control, so that will vary hugely from company to company.

Contrary to its name, this process includes all available stock which you have in your warehouse. If you are a manufacturer, all raw metraials and finishied good will be part of the stock taking process.

Why are stocktakes important?

One of the most important regarding the assets management is inventory, and at the end of the financial period, the value of inventories has a significant impact on the profits and losses of the business.

On the other hand, any product-based business will need to ensure that their levels are 100% accurate from time to time as a part of their inventory control. In some countries, it’s even a legal requirement. But even if you aren’t required to do so by law, here are four key reasons why you should regularly check your goods.

1. See how well you’re tracking inventory

2. Discover stock issues

3. Ensure your business is meeting targets

4. Accurate planning to supply products with clean inventory

How to stocktake?

There are a few steps that every business should follow when recording stock. Generally, these can be broken down into three stages: before, during and after the count.

Before Counting

First of all, decide on a date and time for your count.
For this process accurate planning is required. So, you should focus on this operation and let go of unnecessary issues.

In next step, assign everyone a role and confirm your process. All staff should be aware of how the day will progress and have clear steps to follow.

Just before the count takes place, there are two tasks to complete:

Cut off all your purchases and sales or in case of limitaion for onilne business organize a separate team so that they can take responsibility for this work. Otherwise, the incoming and outgoing stock will play havoc with your figures
Organise the area where the count will take place. Having a clean space helps ensure that there are no unnecessary disruptions

During Counting

What happens on the day will depend on your chosen process. However, there are a few guidelines that every business should follow in order for their take to progress smoothly:

Include everything

Individually recording every item might seem like a tiresome task, but cutting corners can have dire consequences. So take the time to check everything properly, including all your safety stock, cycle stock, and unfinished goods. Don’t just rely on what the labels say.

Count warehouse to sheet

Make sure your staff are following this process in this order, not the other way round:

• Recording the stock that is actually on the shelf
• Noting that figure next to what your system says should be there

Looking at the system and then checking the shelf might seem easier, but it’s far more likely to lead to mistakes.

Take Breaks

You need everyone involved to be as focused as possible throughout, though, so ensuring that you’ve got regular breaks planned will really help keep things running smoothly.

After Counting

Just because you have your figures ready, doesn’t mean that your stocktake is over. There are still a few more steps remaining: and failing to follow them will mean that you don’t get the full benefit from all the work you’ve just done.

With preapred reports, find out which part of the warehouse are remained and and have been forgotten. With a specific plan count these areas as well.

Dealing with stock discrepancies

Any stock discrepancy is bad news for your business — even if you discover that you actually had more stock on hand than you thought. They’re often symptomatic of a larger problem in your inventory control which might be catastrophic if left to fester. Plus, they mean you are running your company on incorrect information.

When you encounter a discrepancy, the first thing to do is to uncover its cause. It might be a simple human error (putting something in the wrong place or incorrectly entering data into the system). Alternatively, it might be a serious problem such as theft or supplier issues.

Finally, after making sure the counting is complete, prepare a proper report of discrepancies for financial purpose and wait for these reports to be approved by the financial unit and the tax auditors.The financial unit confirms the accuracy and finality of your process.

Stocktaking Techniques

1. Periodic cycle stock count

2. Continuous, Perpetual Stock Count

3. Spot Checks

4. Annual Stocktaking

1. Periodic cycle stock count

Periodic stocktaking can be monthly, quarterly or half-yearly checking of the entire or part of stock over one or two days dependent on the amount of stock. The method and process followed is similar to an annual stocktake. all counted physical stock are recorded on stock sheets or scanned and then compared with warehouse management system's (WMS) report or validation files.

In In most companies, inexpensive items may be checked once a year, expensive items or stock with sell-by-dates should be checked more regularly.

2.Continuous, Perpetual Stock Count

With this system, stocktaking is done throughout the year as per a pre-determined plan of action. A-items may be counted monthly, B-items counted weekly and C-items counted daily. This means that a perpetual stock counting record for each item is maintained showing all transactions so that validations can be completed.

Investigations with regard to any discrepancies can be spread over the year and therefore correct comprehensive analysis can be achieved. Year-end accounts can also be prepared expeditiously if continuous validation is fulfilled as per a pre-determined plan.

This action needs an accurate planning specially in online business such as e-commerce companies because the stocktaking process should have minimal or no impact on the operations of copmany. Therefore, stock counting action It should not lead to lost sales and customer dissatisfaction. Therefore, planning and actions in this regard must be done in accurate way and regularly.

3. Spot Checks

Spot checks are carried out by the storekeeper of the warehouse or storage facility when receiving the stock or issuing store items. This method is voluntarily done by the storekeeper or his/her subordinate staff for their own satisfaction and for the accuracy of store items. This method doesn’t get much official recognition since it doesn’t give information to the management of the business. This method is usually practised by organisations that don’t have a continuous system of stock verification.

4. Annual Stocktaking

When periodical stocktaking or continuous stock validation is not undertaken then an annual stocktake is essential.  Annual stocktaking is completed once a year.  In certain instances, the business will be closed for a couple of days for stocktaking while some businesses may suspend receipts and issues until the stocktaking is over.

As with the periodic stocktake physical stock are recorded on stock sheets or scanned and then compared with warehouse management system's (WMS) report or validation files, although in this method all stock will be counted.

Whichever stocktaking method you decide is best for you, stocktaking will provide the following crucial information for your business:

• Determines how well your business is operating
• Confirms your gross profit
• Pinpoints if you have any stock problems, i.e. theft
• Aids you with your pricing strategy
• Provides an accurate account of the stock you hold
• Highlights specific good and bad product sales performance
• Identify how to reduce stock levels and improve cash flow

References:

• RGIS. (n.d.). Different Stocktaking Techniques. RGIS. https://www.rgis.co.uk/tips-insights/different-stocktaking-techniques#
• Unleashed. (n.d.). Stocktaking: A Beginner’s Guide to Managing Inventory. Unleashed Software. https://www.unleashedsoftware.com/inventory-management-guide/stocktaking
• ASP Microcomputers. (2021, March 1). All about stocktaking methods. ASP Microcomputers. https://www.asp.com.au/all-about-stocktaking-methods/