If your business carries inventory as part of its trading operations, it is important to periodically count the actual stock on hand to confirm you are making the gross profit margin you expect. This count may be quarterly, half-yearly, or rotating. Importantly, plan an end of financial year stocktake to ensure your records are accurate and correct and to confirm your profit for the year.
Knowing the value of the stock at the end of the year is an essential measure of profitability. If you don’t know the actual value of your inventory at year-end, you don’t know your true profit or loss and this can lead to misinformed decisions being made within the business down the track.
Planning your stocktake in advance is one of the key steps to ensure your end of year figures are clear and accurate, increasing your intimate knowledge of your business successes and failures while allowing your business to make well-informed decisions going forward.
When beginning to plan stocktake there are key considerations and procedures to follow to guarantee a successful stocktake, here are some great tips to help you get your staff, your warehouse and your systems in place for the best results.
1. Getting your stock ready for stocktake:
Taking the following steps while preparing for your end of year stocktake will help ensure your efforts are not wasted as inaccurate stocktake can make a real difference to your end of year figures.
- Prepare your warehouse, ensure it is clean, tidy and properly faced up;
- Sort items by SKU and place all items in the same place;
- Repack any opened items if possible to ensure they are salable and able to be counted as stock;
- Segregate any “use by date” stock;
- Clearly identify redundant or obsolete stock;
- Differentiate any stock being held on consignment;
- Ensure any stock out on consignment is also able to be accounted for;
2. Putting stocktake procedures in place:
- Clearly mark the stocktake locations on a floor plan of your warehouse;
- Determine who is to count each area;
- Have stock-sheets prepared for each area;
HANDY HINT: Numbering all stock sheets can help ensure you get them all back and complete at the end of the count.
3. Cut-offs are important; when planning, take into consideration and account for:
- Any stock on hand that has been invoiced to customers but not delivered on the count date;
- Any stock that will be invoiced as a July sale, but has already been delivered in June;
- Supplier invoices that have been entered in accounts payable for all stock received before the stock-take;
- Consider supplier invoices that may have been entered into accounts payable before stocktake for goods that will be received after stock-take;
- Account for any credits due to customers for stock returned before stock-take that haven’t been entered in accounts receivable;
- Consider and account for any stock prepayments (usually associated with imports);
- Account for any other timing differences between the actual movement of physical stock and the recording of stock in accounts payable or receivable.
4. Prepare your team!
They will need to know the below information to be able to move through stocktake swiftly; with confidence and accuracy:
- The date and time the stock-take will start;
- Who is in charge of the stock-take;
- Who is in each team;
- Which areas they are to count;
- What the counting methodology is to be; e.g. top to bottom, left to right;
- What is to be recorded on the stock-sheets;
- How to access help if they are unsure about any aspect of the count.
After the count is complete, it is recommended that you test the count’s accuracy by recounting a small range of items. If significant errors or omissions are found, then the sample recounted needs to be enlarged. At worst, it may be necessary to recheck the count of all items.
Proper preparation is the key to an efficient and accurate stocktake. If you or your team is unsure or needs some direction at any time feel free to reach out to our team for assistance, we are here to bring the experience and knowledge to your business in the areas you need it most.
Contact us now to arrange a FREE 15 minute consultation.
