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  • Jesse Neill

How to conduct a successful stocktake in 8 easy steps


With the end of the financial year, many companies are starting to prepare for their annual stocktake. An accurate stocktake can help business owners identify variances that assist them in making more informed purchasing decisions, while avoiding over-stocking items that don’t sell (and also keeping the accountants happy). If you want to improve your cash flow, monitor profit margins accurately, identify slow moving stock and improve your stock management, then it's time to make a clear plan for your upcoming stocktake. A well-structured stocktake removes the guesswork out of the process and helps to avoid potential human errors like over-counting or under-counting, which can end up costing your business thousands of dollars. While stocktaking can be a time-consuming, energy-draining and frustrating task, it doesn’t have to be. We’ve laid out eight easy steps that can help guide your business to a more effective and successful stocktake. 1) Set a time and date


A set time and date are crucial when minimising the impact a stocktake has on business operations. Before you start, you should first consider the amount of time required to complete a successful stocktake. To reduce the level of interruption to your business, it is therefore best to conduct a stocktake during a slow sales cycle or at the quietest time of the day. Many businesses will conduct a stocktake outside of business hours, however it’s important you find a time that works for you and your staff, while also ensuring you don't hurt your bottom line or create unnecessary distractions.


2) Organise stocktaking tools ahead of time


As part of your planning procedure, you’ll also want to ensure all team members have the tools they need to get the job done. Your business should already hold detailed records of your inventory, as well as descriptions of items and their serial numbers, universal product codes (UPCs), and/or stock keeping units (SKUs) on what are known as stock sheets.

Some of the most common tools for stocktaking include:

  • Calculators

  • Pens

  • Clipboards

  • Stocksheets

  • Scales (if counting stock by weight)

  • Handheld Scanners (for barcoded items)

  • Mobile Devices (if you use a cloud-based inventory management system like Xero)

You might need other tools aside from those listed above, but this should provide a general idea of what is normally required for a successful stocktaking process.


3) Prepare your stockroom


Trying to count multiple items scattered everywhere will make the task near impossible. An organised and tidy stockroom will make sure your stock items are readily accessible and will make it easier to find and count stock, reducing the chances of miscounting stock. Another possible step to make your stocktake more efficient would be to label shelves and create well-defined sections that stock should be stored in, as well as making package labels that clearly identify what’s inside the package. It's also a good idea to pre-count items into lots (of 10, 50 and 100, for example) when counting large quantities of any stock items. Anything that you can do before taking stock is useful and ensures mistakes can be avoided later on — this includes preparing your stockroom.


4) Categorise your stock


Before you start the stocktake, it is also a good idea to make sure you know where stock is located and ensure you have identified all stock that is owned by your business. Any stock that has been purchased by customers but is still in your warehouse, as well as any stock received but not yet recorded in your system, should be excluded from your stock count and isolated. Determining exactly what does and doesn’t need to be counted will help to avoid mistakes. All staff members also need to identify damaged, slow moving, or obsolete stock so they can be valued at a discounted price or completely removed from the stocktake.


5) Define your methods


Whether you have a small stockroom with a few types of inventory or a massive warehouse filled with a wide range of stock, it’s essential you create a clear system and explain how you would like your stock to be counted. Below is a list of ideas to help effectively organise the counting part of the stocktake process:

  • Stocktaking should be conducted in pairs, with one person counting the stock and calling out the amount and the second person recording and double checking this amount.

  • Ensure stocktakers know which sections they will be counting and in what order.

  • Have stocktakers count in the same direction — i.e. left to right, top to bottom.

  • Mark counted stock with a coloured pen or marker as a visual cue of what’s already been included in the stocktake.

Creating a similar process with clearly defined methods will help ensure a smooth and successful stocktake.


6) Check for variances


Once the initial stocktake count is completed, you need to check for variances and conduct a recount if necessary. Variances can be under or over, both of which affect the valuation of the stock. If you have variances in your stock, you need to find out why.


Some common reasons for variances in stock include:

  • Items marked with an incorrect label

  • Stock stored in multiple locations

  • Records not written off correctly

  • Stock counted multiple times

  • Invoices not yet received

  • Dispatches not yet processed

Unaccounted stock variance will cost your business, so you need to check every line for a potential reason why stock is out of balance. Once the count is correct, the variance should be correct.


7) Update Stock

After the inventory has been counted multiple times, all variances have been found and you are confident you have counted everything correctly, it’s time to update the stock levels. All information should be available in your accounting software and you can report on the current valuation of all stock in your database. This will be the new base of truth that your inventory system will use to record stock transactions against. From here, you can make better choices based on what’s in stock and what needs to be ordered.


8) Continually improve your stocktaking process


Stocktaking doesn’t have to be a static process that follows a rigid set of procedures – it can evolve and change over time, that way the process can become more efficient. Your stocktakers and supervisors should be encouraged to suggest improvements and help develop innovative procedures to produce a more effective workflow. An easy way of doing this is to provide opportunities for feedback at the end of your stocktake. Technology can also help streamline the process and make it easier to track inventory throughout the year.

It’s important to remember that stock equals money. Carrying too much or not enough stock to meet customer demands can have a negative impact on the profitability of your business. A successful stocktake will help streamline warehouse procedures and provide you with accurate information so you can better deal with stock issues and make smarter operational decisions. This data will also allow you to implement new strategies to help reduce waste, optimise your inventory, and sell more stock, while also decreasing the amount of broken, stolen or slow-selling stock. This will ultimately help to increase profit margins. The eight steps outlined above will help you establish a clear plan and procedure for your stocktake to ensure it is a successful one.

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