As we progress into the new year, have you done stock-taking for your small business? As long as your business has inventory, stock-taking becomes a necessity for better accounting and financial planning, and management.
Unfortunately, stock-taking is a tedious process but crucial in running a business. Although the process may cause a slight disruption in the running of the business during the day(s) it is conducted, it has many advantages worth the sacrifice.
What Is Stock-Taking?
Stock-taking, also known as inventory taking, is the process of physically counting the actual stock you have and comparing the numbers with what you have on your books. You can note down the stock as you count or use some software if you can afford it for your small business. Stock-taking can help check the condition of items to determine if they are suitable for sale.
Item loss can be accidental or deliberate due to theft or damage; hence stock-taking is worth making time for. Taking inventory will help you make informed decisions and predictions for your small business.
How Often Should You Do Stock-Taking For Your Small Business?
This method involves counting your stock once a year. Businesses should consider this as the minimum frequency to keep their records accurate.
A periodic stock-taking occurs every month, a few months, or twice a year. Just like annual stocktakes, all inventory is counted in one sitting. This method is the most popular for stock-taking.
Continuous stock-taking occurs many times throughout the year, and sometimes different items are counted at varying times. For example, some items are counted once a week and others once a month. This method means that there are always up-to-date stock levels; thus, it is easier to prepare end-of-year statements.
This method involves counting items randomly when you notice some discrepancies. For example, if you notice a difference in physical stock levels of one product than that on your software or books, you may carry out a spot check to discover the cause.
Stockout validation only occurs if an item is out of stock or very low. This method helps understand why and when a stockout occurred to ensure it does not happen again. You do not have to conduct stockout validation if your chosen stock-taking software and physical method data are accurate.
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How To Do A Stocktake For Your Small Business
Doing a stocktake can be challenging, and you need a sound system and plenty of organization.
The following are tips to do stocktake most effectively:
When are you going to conduct the stocktake? The amount of time spent on stock-taking depends on how much stock you have and can take 1-2 days. Stock-taking may mean shutting up shop entirely or doing it over evenings. Sometimes you may need assistance from staff, friends, and family. It would be best to avoid trading during stocktake because sales made while you are in the stock-taking process could mess with your numbers.
Define A Process
Define a process by determining where you will start and what you are going to do with damaged goods. Ensure everyone involved is briefed beforehand. Pick a category and work your way through one by one, taking stock of everything from one end of the room to the other.
Create A Schedule
Creating a schedule helps you plan how much time is needed to complete the stock-taking process. With this information, you can notify your customers when you will be closed. A schedule is like a plan of action and includes time allocated to specific items or areas of the stockroom showing when to take breaks.
Use A Stock-Taking App If Possible
Recording all your stock digitally at once would be better for you. Stock-taking apps make the process easier.
Print Off Stock Sheets
Regardless of whether you use inventory software or not, you should print out an inventory list to mark down stock levels of each product against what you have on your system.
Organise The Stock Room
Make sure everything is where it is supposed to be before starting the stocktake. Organizing the stockroom will allow you to count everything under one category in one go and reduce anomalies.
Do not guess or estimate because doing so gives inaccurate data of what you have.
Advantages Of Stock-Taking
A key advantage of stock-taking is determining if you are overstocking. You can save huge amounts of money if you know how you are overstocking. Deadstock takes up storage space and money that could be used for something else or saved.
Stock-taking helps increase profits while reducing loss and wastage. You are in a position to see what is selling fast, and if things are going wrong, you capture them at the earliest opportunity.
Accurate stock-taking will help you make informed, data-backed decisions to invest in the right products depending on what is selling fast. You can also see deadstock that you should think of making flash sales to shift the stock.
Inventory in the balance sheet entry is an asset and should be as accurate as possible for accounting needs. A thorough stocktake will help you get assets right on the balance sheet.
Stock-taking helps you monitor real-time stock levels-identify shrinkages, damage, and theft. You can uncover discrepancies promptly. You can reduce loss by cross-checking what you have to what you should have and what you have. Regular stocktake reduces theft from staff. If investigations into discrepancies show a shoplifting issue, review your security measures to ensure offenders are captured and prosecuted. In terms of damage, stocktake will help you highlight where and why the damage occurs.
Stock-taking helps you identify items with expiry dates on time. Monitoring seasonal stock ensures that much of it is sold before the expiry date.
Stock-taking involves physically counting the actual stock you have on your site(s). Sites include your business address and any other storage or warehouse facility you own or rent. There are many reasons to do a stocktake, including theft and accidental or non-accidental damage. Stock-taking will identify any issues of stock loss and give accurate data for performance analysis to maximize profits.