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Australian EOFY – Keep Your Inventory Updated with Stocktakes

BY Cassy Locke 23 Jun, "15

Fast approaching the end of the Australian fiscal year, guest blogger Heather Smith emphasizes the importance of end of the year stocktakes to a business's success. Read on for tips on how to conduct a stress-free stocktake.

One of the perks of being a young accountant, is you get invited to partake in end of year stocktakes. I joined a team that travelled to Banbury in Oxfordshire for the end of year frozen food count. I was given a huge padded anorak (parker) to wear and looked like the puffy Michelin man. I boarded a cherry picker, and was driven around a massive frozen warehouse. My mission was to accurately count every frozen sausage roll in that building. As the back of house accountant, it’s always novel to get out the office, though my excitement turned to disappointment when I learnt the other stocktake team got to travel to Switzerland and count chocolate!

Businesses undertake stocktakes, or a count of stock on hand, to determine the accurate number of stock items the business owns. With this information, the accountant reconciles the physical count of stock to the financial inventory records. If significant variances are highlighted, the underlying reason for the variances may need to be identified. For example could stock damage be prevented with better warehousing facilities? Could stock theft be prevented with improved security measures? Accurate knowledge surrounding stock movement and stock on hand enables you to make informed decisions about your inventory management and deal with theft, slow-moving items, damaged stock, and technology obsolescence. Minimal stock count variances indicate the adequacy of the inventory management and control features in place.

If your business manages inventory, you’ll need to rally the troops and prepare them for an end of period stocktake. Its good practice to undertake stocktakes periodically, but at a minimum they must be done at the end of the financial year.

Typically when organising and rolling-out a stocktake, there is a stocktake coordinator and there are a lot of counters. Depending on the complexity, the counters may be grouped in teams. Think of Dru and his minions.

minions

OK that may have just been an excuse to add a cute image of minions to a stocktaking article – who can resist minions?

Planning for the Stocktake Process

Plan the stock taking cycle. Give yourself enough time to complete your stocktake by the specified deadline.

Establish where the business stock is located. Stock may be located at different locations, or may be defined as consignment stock and should not be counted. Alternatively stock contained at the main warehouse may be pre-sold to a customer, and clearly needs to be recognised as such in the count, otherwise there could be a double up in the records.

Tidy the warehouse, organise inventory, place bin locations in a logical order and clear the pathways. Plan how counters will access the stock, and if necessary, arrange for extra ladders or cherry pickers. Break the warehouse into sections, and during the stocktake, tackle and complete a section at a time.

Clearly label or bar code inventory, or the shelves the inventory is sitting on. A count label (with the counters initials) can be added to inventory sections, to indicate a count has been conducted. If a number of counts will be undertaken on the same area, use different colours for each count.

Charge up any equipment, such as the bar code scanners and laptops that will be used during the stocktake. It may also be worth bringing some extra electricity chords and chargers to the warehouse.

In preparation for the stocktake, the coordinator will pack a stocktake toolkit containing clipboards, stock sheets, write-off sheets, pens, calculators and handheld - preferably wireless - bar code scanners if relevant for all counter groups.

The stock sheets should clearly list the item to be counted and the estimated inventory count should be left blank to be filled in by the counter.

The purpose of the write-off sheets is to provide a place for the counters to add extra information about the condition of the inventory counted. Perhaps it is damaged and needs to be written off?

The stock coordinator remains in a central position, with a comprehensive understanding of what needs to be counted. This is then broken down into stock sheets, which are issued to counter groups. They counters complete their issued count, and hand the stock sheets back in. Of course, every area is counted at least once. Depending on the complexity of the business, all areas may be completely counted a second time, or spot counts may be undertaken to check for accuracy. Some businesses like the stock coordinator to use a purple pen and undertake each count in a different pen colour.

During the Stocktake Process

Devise a stocktake route, e.g. start at the top left of all shelves, and work down and around. This ensures that all items are counted, even if perhaps they are not on the stock sheet.

Advise counters to count every item of inventory. If necessary, open boxes to double check the quantity inside, or grab a ladder and safely climb up the shelves, ensuring an accurate count the first time.

Instruct counters not to use mobile phones, earphones, or anything else that can distract them from undertaking an accurate stock count. So if you see someone on a cherry picker with a selfie stick – you know they are definitely distracted, and a recount of the area may need to be undertaken. Distractions lead to errors and wasted time.

Once the count has been undertaken, the accounting records need to be updated. Check with the tax accountant that s/he is in agreement with the changes proposed. It’s vital that an accurate stocktake is undertaken, as the stock affects both the net worth of the business, and the profitability of the business. Additionally, an asset stock is held on the Balance Sheet, and the final count will be the opening value of stock for the next period. The difference between the selling and purchase price of the stock directly impacts the Profit and Loss statement. It’s important also to remember any stock that has to be written off reduces the business bottom line.

Ensuring the business has robust inventory management procedures in place allows you to have a stress-free stocktake, avoids any unnecessary write-offs, and maximizes the businesses profitability and net worth.

What tips do you have for a stress free stocktake?

Image Credit: www.the-mommyhood-chronicles.com

See also:

How to take inventory without losing your mind

5 Essential business mobile apps to help you manage your business and sell better 

4 Points to consider when calcualting safety stock levels

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