Running or managing a business means you have to focus on many different areas simultaneously to ensure everything runs smoothly. One particular area is inventory. The proper management of inventory is an important part of running any successful business. The day-to-day runnings of your business can be hectic. Every so often it is important to conduct a stocktake in order to better understand your inventory. Let's take a closer look at the importance of stocktakes and the 4 steps to conducting a successful stocktake for your business.
What is Stocktake?
Stocktake is quite simply determining the stock your business has on hand. This is most commonly conducted at the end of the fiscal year and not only tells you how much stock you have but where it is located. By conducting a stocktake, you will gain useful insights into your business such as:
- Issues with your inventory management process
- Alert you to issues of lost or stolen products
- Informs you of inventory which has expired or incurred damage
- Helps you make sound financial decisions when it comes to purchasing inventory
A Successful Stocktake Starts With Having the Right Tools
You might have a great memory, but you will not be able to keep the numbers straight in your head. You need a way to record inventory counts so that you have them in front of you. If multiple employees are involved in the stocktake make sure there is a way to trace the chain of responsibility. For instance, you can have employees initial their work or each employee can use different colored pens. Recommended tools include:
- Writing utensils (preferably pens or markers as opposed to pencil that can be erased)
- Printed sheets of the last recorded inventory! From your software, or product listing
- Barcode scanners (if applicable)
- Electronic record keeping device such as a tablet or laptop (if paper record keeping is not preferred)
Tackling this task with just your mobile phone and memory will more likely than not lead to errors and frustrations. It is also advisable to keep chitchat and music down to a minimum as stocktake requires a great deal of concentration.
"Close" Only Counts in Horseshoes and Hand Grenades
As tedious as it is, it is important to count every single piece of inventory and its location. An estimate won't cut it and you will only end up hurting yourself with an inaccurate count. If your inventory is extensive, it might be a good idea to have one person make an initial count and then a different person make a second count to reduce the likelihood of a counting error. After all, we are all human.
If you want you could even break the inventory into sections and delegate to different employees to prevent fatigue and ensure accuracy. The method you choose depends on employee availability and the size of your inventory stock.
Compare and Cross Your Fingers
Compare the current inventory count with what your last records indicate. If the numbers line up that's great and means your method of keeping up with inventory throughout the year is effective. If there are any discrepancies, try and figure out why the numbers do not match. Was there a failure to update inventory? Minor differences are more than likely due to human error and may be written off as such. However, major discrepancies indicate either the need to revise inventory management strategies or unfortunately the possibility of stolen or lost inventory. This could either be due to internal issues or possibly external problems such as lost shipments. Tread carefully before accusing employees of dishonest behavior.
Update Your System's Records
Last but not least is updating your inventory records system! Update your system's records so that they match the inventory you currently have in stock. This a critical component of the stocktake, as failure to do so, essentially renders the stocktake useless. It is important to note that simply updating records without discerning the reason for differences means missing out of valuable information for your business.
The Industry Leaders in BookKeeping
Following these 4 steps will ensure an accurate stocktake that increases the efficiency of your business, enabling you to make informed management decisions that will minimise risk and increase profitability.
Although keeping records is important, there is so much more that goes into a profitable business. Eye on Books is Australia's leader when it comes to keeping accurate records for your business. Our experienced team understands you have more to focus on than spending countless hours making sure adequate inventory records are kept.
Instead, spend your time focusing on ways to increase the efficiency and profitability of your business and leave the bookkeeping to us. Our team will learn the goals of your business and create unique solutions that meet your needs. Contact us for more information or to schedule an appointment with one of our experienced advisors.