A stocktake is about counting your inventory items. It’s important because it lets you refine your inventory management processes and catch theft and fraud early.
What is a stocktake?
A stocktake is when you physically count your inventory to check it against your records. You'll then make any adjustments to ensure your records match the actual stock levels.
Why are stocktakes important in business?
Stocktakes are important in business because they give you a real-world picture of your inventory, letting you recalibrate your records, improve demand management and increase your understanding of your business budgets, forecasts and processes. Any mismatches will help uncover where business processes are failing, helping you minimise future losses.
How often should you perform a stocktake?
How often you perform a stocktake depends on how much inventory you hold, the value of the items and how frequently you turn over the stock. For example, you can check lower-cost items less often because inaccuracies won't have as much financial impact on your business. You should perform a thorough stocktake at least once a year, although many companies will benefit from performing them more often.
How to perform a stocktake
Performing a stocktake seems simple: count what's on the shelves, then compare it to the records. However, if you're dealing with thousands of items across different departments, you'll need a plan for managing the people and the data they collect.
Set a date and time for the stocktake
A date and time lets you and your staff plan, including setting expectations on timings and systems they’ll use. You may even consider shutting down operations or scheduling the count after hours. You'll need time after the count to resolve any issues you uncover.
Check stock records are complete
You'll need these to compare your stocktake numbers against, so tie up any loose ends in your inventory system. You should also pause all sales and purchases just before the count.
Locate all your stock (including active deliveries)
Don't forget to include items not on your shelves – you may have items being delivered, sitting in a back room as safety stock or waiting for collection.
Count all physical stock
Counting all physical stock can be done simply with a pad and pen or spreadsheet. However, this comes with much more administration time and more risk of inaccuracy. Many warehouses use barcodes and scanners day-to-day, which they can also use to count stock.
Compare count to original stock records
As your staff finish counting each group of items, compare them with the original stock records, noting any discrepancies.
Review discrepancies and recount if required
Review any discrepancies you uncover, and recount items if you suspect an error. If you're sure the numbers are correct, you'll need to take steps to find the cause of the discrepancy to minimise future risk. You may need to change processes, invest in new software or add security.
Update stock levels
When you're confident in your stocktake numbers, update your inventory records with the new figures.
Schedule next stocktake
Schedule your next stocktake as soon as you've finished the last one. This will ensure you stick to a regular schedule and send your staff a message that you're serious about optimising operations and minimising theft, damage and other causes of errors.
Benefits of performing a stocktake
The benefits of performing a stocktake include improving decision-making and preventing cash flow problems. They can also help you:
Minimise theft and stock shrinkage
Whether through theft, poor stock control, missing orders or damaged stock, it’s normal to have some discrepancies between your inventory records and what’s actually on the warehouse shelves.
Keep your inventory up to date
Even with the most robust record keeping, errors can slip in. A stocktake will ensure your records are accurate and up to date.
Understand stock levels
Understanding your stock levels is essential to informed decision-making. While your inventory records give you a reasonable estimate of your stock levels, only a stocktake will tell you what you've got.
Identify low inventory levels
Identifying low inventory levels is crucial. If items are running low in the warehouse and this isn't reflected in your inventory system, you're at risk of a stock out and missing sales.
Avoid overstocking
Stocktake will help you avoid overstocking items by giving you a real-world picture of your inventory. If you're unknowingly overstocking an item, you'll increase your carrying costs, tie up your operating cash flow and warehouse space, and risk the items spoiling or becoming obsolete.
Identify theft or fraud
The reality is that dishonesty can and will happen. A stocktake will help you catch any theft or fraud earlier, minimising losses. Scheduling regular stocktakes will discourage dishonesty, as people will know they're more likely to be discovered.
Identify old stock and clearance items
While your inventory system may track use-by dates and inventory days, seeing each item for yourself is essential. For example, are there items left over from last season that you should discount? Have you inadvertently been selling newer products ahead of older ones that could become obsolete?
Risks of performing of a stocktake
There are risks associated with performing a stocktake that you need to weigh against the benefits. Some considerations include:
Disruption to business as usual
Preparing for the stocktake, counting, inputting correct numbers and analysing the results takes time you could be spending elsewhere in your business. The time you spend will vary, depending on the size of your business, how you’re performing the count, the kind and number of items you stock, and the resources you can invest to speed things up. Some can finish their stocktake in a few hours, while other businesses should expect to dedicate several days.
Risk of stock count inaccuracy
The accuracy of stock counts relies on the people, which means there's always a risk of errors.
Potential impacts on customers
Stocktakes can lead to delivery delays that you'll need to manage. That's because the disruption caused by a stocktake can impact or even pause the smooth running of your warehouse.
Decreased staff engagement
Staff engagement can be a challenge during a stocktake – this is dull, repetitive work outside your people's usual tasks.
How to improve stocktaking
To improve stocktakes, follow a clear plan and keep lines of communication open with your team and suppliers. You should also do the following.
Schedule regular stocktakes
When you perform regular stocktakes, you'll have a better overall understanding of your inventory. That's because any errors in one stock count should be balanced against the next one. Your team will also become more familiar with the process, making each stocktake faster, more straightforward and more accurate than the last.
Use cloud-based inventory management software
Cloud-based inventory management software can ensure your record-keeping is as accurate as possible. Choosing the best inventory management software can also make the stocktake process more efficient and precise, with numbers immediately inputted into the system.
Implement barcode scanning
Barcode scanning will improve your record keeping in general while making stocktakes faster and more accurate by eliminating the need for manual data entry.
Reward staff involved in stocktakes
Rewarding staff doing your stocktakes encourages them to fully dedicate themselves to the task. The value of your stocktake depends on how accurately they count, while their speed and efficiency can impact your business.
Stocktaking FAQs
What is the difference between a stocktake and inventory management?
Inventory management tracks and controls the items coming in and out of your business. Ordering, receiving, storing and selling inventory are all part of stock control. A stocktake is another part of inventory management when you physically count each item you hold.
What are the consequences of too much inventory?
The consequences for a business with too much inventory include – tying up too much cash in inventory, spending too much on storage and the risk of being stuck with old or dead stock you can’t sell.
What is the purpose of a stocktake?
A stocktake gives you a real-world picture of your inventory so you can fix any discrepancies in your records, make better decisions and improve inventory management processes.
Can stocktakes be outsourced?
Stocktakes can be outsourced to specialist businesses. This lets you focus on your core business and may improve the speed and accuracy of the count.
Stop and take stock
With regular and thorough stocktakes, you'll have a more accurate understanding of what's in the warehouse. This delivers the information you need to make better business decisions, avoid under or overstocking, catch fraud and theft before they impact your business, and further refine your stock management processes.
Performing regular stocktakes with MYOB's inventory management software will help you make sure your inventory records are accurate, giving you the insights you need to grow your business. Get started with MYOB today.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.