March 31 has just passed us by, and many business owners who carry stock dread this time of year. Why? Because March 31 means stocktake!
But do stocktakes have to be something you hate? Here’s why you should approach stocktaking as a necessary and positive part of your business.
A stocktake is a mechanism to make sure that the stock on hand registered or recorded in your books is accurate.
If you’re like most businesses, you’ll have an inventory tracking mechanism within your business. When new stock arrives, it is checked off at point of receipt to make sure that you’ve actually received everything you’ve ordered. This process increases the stock on hand of the business and records your purchase. When a sale is made, the stock on hand is reduced and the sale is recorded.
But in the case of a retail business, there can be times when the actual physical stock on hand no longer matches what’s on your system.
There are many possible reasons for this, including:
Stocktaking is a crucial business practice that allows you to:
Yes – at the very least, your stocktake needs to be carried out once a year. The reason? You need an accurate stock count and value for your end of year accounts, which directly impacts the profit you make and the subsequent tax you pay.
While one stocktake a year is vital, an even better business practice is do smaller, more frequent stock counts throughout the year, because:
One of the best ways to facilitate smaller stocktakes is to categorise your stock in your inventory management system. The categories don’t actually matter; they only have to be meaningful to you so that you can learn from them when you analyse the reports.
For example, if you’re selling t-shirts for women, men and children, it’s a good idea to categorise them accordingly. You could then also categorise by fabric weight, length of sleeve, and so on. The point of this is that it allows you to glean more information from your reports to identify trends in your sales. Which items are selling fastest, and which are selling slowest? You can quickly and easily find answers to questions like those when you use an inventory tracking and management system.
Those reports are even more useful if you’re counting stock on a regular basis – say, every three months – to make sure that no stock has been lost due to theft or recorded incorrectly.
So, you’ve counted your stock, and you’ve noticed inconsistencies and trends via your reports. What next?
The thing about counting your stock is that, while it’s important, you actually have to apply the count results to what’s recorded in your books. There’s no point in counting your stock on hand and investigating the variances and then not actually making those adjustments to your records.
A quick recap on our tips for better stocktaking:
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