17th May, 2018
If your business produces or purchases stock for the market, you’ll likely need to do at least one stocktake at the end of the financial year for tax reasons.
If you choose not to stocktake, your records should still include what you estimated your stock variation to be and how you arrived at your estimate.
Your opening and closing trading stock value is reported in your income tax return and is used when calculating your taxable income.
In a stocktake, you must count each item of your trading stock, and make a “reasonable estimate” of the items’ value, using cost price, market value, or replacement value at financial years’ beginning and close.
You also need to update your stock and financial records post-stocktake, describing each article of stock, its value, who valued the stock, and the basis of the valuation.
So the more stock you have, the more difficult and time-consuming a stocktake can be.
If you don’t have it already, consider investing in some stocktaking software. Many point-of-sale programs do have stocktake software built-in, but some are better than others, so make sure it suits your purposes.
READ THIS NEXT: An inventory manager’s guide to stock control
Have your stocktaking supplies ready to go. Make sure you have enough chairs, pens, clipboards, barcode scanners, and stock lists, and that staff have been briefed on the procedure.
It’s often better to bring in extra staff for stocktaking. It’s a lot more efficient and means less pain and stress for everyone.
Stocktaking is a lot easier if everything is neat, tidy and labelled properly.
Sort your inventory into groups so that similar items – such as those in the same range – are together. Also make sure you know where everything is.
Have a list of what stock is in what location, such as what is floor stock, what’s in the storeroom, and if you have any stock off-site.
Ingersoll advises identifying damaged, expired, and missing stock to remove it before the count. Also, identify consigned stock and stock that has been sold but not dispatched, and keep these separate from your inventory.
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Make sure your stock levels do not alter during your stocktaking. While you don’t want stocktake to cost your business, it’s best to shut up shop for a stocktake if you possibly can.
Arrange stocktake for a quiet time, outside business hours if possible.
If your business is open seven days a week and stocktaking after-hours isn’t an option, Turner recommends closing your store for a day or two when business is quiet so you can get your stocktaking done.
Try and make the stocktaking experience as enjoyable as possible. Have everyone wear comfortable, casual clothes and shoes and have a bit of a laugh together.
Allow people to sit while counting, if practical, and Turner advises ensuring the team takes regular breaks.
You’ll have a more accurate stocktake if everyone is comfortable. And my staff always appreciates coffee and pizza.
Physically count each item. Do not assume current inventory data is correct; only a full stocktake will tell you what is on hand.
Also be sure to check stockrooms and other storage areas for items that may have been forgotten about in the hustle-and-bustle of normal business hours.
Don’t forget manufacturers’ returns, items reserved for customers in hold cupboards, and products which have been sold on lay-by. These all need to be checked in your count.
If you have a large amount of stock, it’s a good idea to do a double-count. A double-count becomes a necessity when there is a discrepancy between pre-stocktake records and the results of the physical count.
Have each staff member use a different coloured pen to mark off what they’ve counted to prevent accidental double-counts. Mark items off again if they’ve been double-checked.
Missing items often show up in another box during the stocktake, so don’t panic. If it’s not found during the stocktake, check your records to see if the missing items might have been stored elsewhere, including off-site.
Overall, about three per cent of retail turnover is in theft.
Small, expensive items that can easily be concealed like necklaces, batteries and cosmetics are often targeted. Stocktaking year-round helps identify retail shrink.
It’s a good idea to do at least a partial stocktake on regular basis to see how the results line up with your purchases and overall profitability.
Ingersoll advises that a stocktake can fine-tune your stock ordering and control practices and reduce stock levels and improve cash flow.
Stock spot checks can uncover items businesses weren’t aware they had on hand, products that weren’t entered into the system properly upon arrival, and which items haven’t been selling well.