It is almost that time of the year again. Counting stock is overwhelming for a lot of small business owners – it is a time consuming task and day to day business often takes priority over stocktake. 

Whilst it may be overwhelming, having an understanding of your stock levels is a good tool to have. It will help you to understand:

• Am I ordering too much?
• Is there old stock that needs to be discounted now, before I have to write it off? 
• How did I end up with so much old stock?
• What should I do differently next year when it comes to ordering? 
• How should I adjust our ordering processes?
• What is my optimal ordering strategy?
• Do I have a theft problem and what areas of my store need to be monitored? Or should I rearrange stock?
• Are my staff accurately recording stock sales at the point of sale? How can I ensure that there is less room for error in this process?

Too much stock or dead stock is not the best use of your funds – so use the stocktake process as a way to learn more about your business and make it less about compliance.

How often should you stocktake?

Ideally stocktakes should not be performed just at year end. If you perform regular stocktakes (monthly, weekly or sometimes daily for some industries) you will obtain better knowledge about your business. You will be able to quickly determine what is selling and what isn’t, items that are in high demand and that might warrant a price increase, items that need to be discounted and sold before they are required to be written off, and even items that are being stolen that warrant extra security measures.

How should you perform a stocktake?

1. Create an inventory sheet. Your POS system should be able to provide this for you.
2. Decide which staff are best placed to be involved. Walk them through the process and ensure that everyone understands. They will all need to be familiar with stock codes and inventory procedures. 
3. You might assign certain parts of the store to certain staff. If you intend to perform frequent rolling stocktakes, create a schedule for sections of the store, dates for stocktake and who is responsible.
4. Perform a physical count of every item in your store. Ensure that the amount that you count is accurately recorded on the inventory sheet against the correct item.
5. Highlight variances in stock levels (stock levels that your POS shows compared to amounts physically counted).
6. If you have barcodes and an ability to scan items, cross check your inventory sheet with a scan of the item that you have on hand. This will ensure that you are recording against the correct item on the inventory sheet.
7. Review your report and make sure everything is accurate.
8. Provide this information to your accountant.

What can I do to make stocktake easier?

There are a few tips to consider to make your stocktake process easier:

• Plan ahead – organise your records and make sure all data is up to date before you commence.
• Perform regular counts – this will ensure there are less surprises and headaches at year end.
• Automate – find a POS system that works for your business, allows you to track inventory levels and provides useful inventory reports.
• Train your staff – make sure your staff understand the importance of stocktaking, why you do it and how to do it correctly. Don’t make it all about compliance – why not talk to them about the information that stocktake provides you as a business owner and how you can use it to better service your customers? Untrained staff are more likely to double count, count incorrectly or record data against the incorrect item. This is costly for your business.
• Organise your staff – assign each person a specific job, clear timeframe and ensure they understand how they can work quickly and efficiently.

What next?

Don’t just hand the information over to your accountant and sigh with relief that the dreaded task is over for another 12 months! Now that your staff are trained and know how this works, put in place a stocktake calendar so that items are counted regularly throughout the year.

In addition, use the data that you have now collected. Analyse it and determine how you should improve your stock ordering processes, the levels of stock that your business needs, stock that you need to remove and stock that you need to revise pricing for. Look at discrepancies and try to determine whether items are being recorded accurately at the sales desk, or whether you have a theft problem that you need to address.

If you need help understanding your stock please feel free to contact our Business Services Advisor Jenna van Nierop on 9842 5155.