How To Nail Your Stock Control
Stocktakes are crucial part of any business that holds stock. Getting them right is key to effective stock control, but that’s not always simple if you don’t have the right tools to set you up for success. In fact, every year, UK businesses incur significant losses, amounting to billions due to ineffective stock control practices. These losses manifest in various ways, from bloated inventory costs to dissatisfied customers and even financial misrepresentation – so getting stocktakes right is an important step in avoiding those pitfalls.
Our blog looks at how to effectively do a stocktake, so that you can reap the benefits and make sure you’re doing everything to enhance your business profits.
What is a Stocktake?
First things first, what exactly is a stocktake?
A stocktake, also known as stock counts or inventory counting, is the process of physically counting and recording the quantities and condition of all items held in an inventory or warehouse. It’s an important element of stock control and inventory management as it helps businesses ensure accuracy in their records, identify any discrepancies and make informed decisions when it comes to purchasing, production and sales.
There’s a number of way to you can perform stocktakes, which we’ll come to later.
The Purposes of a Stocktake
Stocktaking serves several important purposes for businesses, including:
- Ensuring Accuracy of Inventory Records: By physically counting the stock on hand, businesses can verify that their inventory records are accurate and up-to-date. This helps prevent discrepancies between the actual stock levels and the recorded amounts, which can lead to financial losses and operational inefficiencies.
- Identifying Discrepancies: Stocktaking can reveal discrepancies between the physical inventory and the recorded amounts, which can indicate potential issues such as theft, damage or errors in data entry. By identifying these discrepancies, businesses can take corrective actions to prevent further losses and improve inventory management practices.
- Informing Purchasing Decisions: Accurate inventory records obtained through stocktaking provide valuable insights into stock levels and consumption rates. This information helps businesses determine when to reorder stock and in what quantities, ensuring they have sufficient supply to meet customer demand without overstocking or understocking.
- Optimising Production Planning: For businesses involved in manufacturing or production, stocktaking of raw materials, components and finished goods is essential for planning production schedules efficiently. Accurate inventory data helps ensure that there are enough materials to meet production targets without disruptions or delays.
- Preventing Expired or Damaged Goods: Stocktaking allows for the identification of expired or damaged goods that may not be fit for sale. This helps businesses prevent the loss of revenue from selling defective items and maintain customer satisfaction by providing quality products.
Stocking Methods and Frequency
The frequency of stocktaking depends on the nature of the business, the value of inventory and the risk of discrepancies. For businesses with high-value or fast-moving inventory, stocktaking may be conducted more frequently, such as monthly or at least quarterly. For businesses with low-value or slow-moving inventory, stocktaking may be less frequent, such as annually.
There are two essential levels of stock counts, each serving a unique purpose.
Complete stock counts
A complete stock count, also known as a full inventory count, is a process of counting all of the inventory in a business at a specific point in time. They are the more common of stock counts, and whilst they have a place, particularly for those small businesses, or businesses with low sales volume, they don’t always paint a full picture. They includes all products in stock, regardless of where they are located, such as on shelves, in warehouses, or in transit.
These should ideally take place, at least, once a year. It primarily tells you what has happened after the issues have occurred. It’s essential for historical accuracy but may not prevent problems in real-time.
Perpetual stock counts
A perpetual stock count is a method of tracking inventory levels in real-time. They are regular, partial counts based on a criteria for example, they can be conducted by product line, sections of the warehouse, or any other manageable subset.
These are the real game-changers. They function as a proactive control measure, identifying issues before they escalate. Instead of waiting for an annual audit, perpetual stock takes allow you to take immediate action based on real-time data. If it does identify a significant issue, then we recommend a complete stock count once the issue has been rectified, to get comfort over the scale of the issue.
Then there’s the topic of seen vs blind stock checks. These two approaches offer distinct advantages and understanding the differences between them is essential for effective stock control.
Seen stock checks
They are the traditional approach to inventory audits. In this method, those conducting the count have full visibility of the items they are tallying. They can see the product, its label and any associated details. These checks are straightforward and work well for validating the accuracy of inventory records and provide an opportunity to identify discrepancies between physical stock and recorded quantities. However, they are more susceptible to human error, as counters might rely too heavily on visual cues or overlook subtle discrepancies. This approach may also lack the element of surprise, potentially allowing staff to adjust inventory figures before the audit too.
The key risk with seen stock checks is bias. A seen count will allow the counter to know how many units of stock the system is showing – so they have a number as a starting point. It can lead to a quick visual check that it looks “about 100” so the system must be right, rather than individually counting. It’s the expected quantity that’s the key detail hidden in a blind stock check.
Blind stock checks
On the other hand, these counts add an element of surprise to the process. In this method, the individuals performing the count do not have access to the product information or any visual cues. They rely solely on count sheets or digital records. These checks force greater attention to detail and accuracy. Without the crutch of visual confirmation, counters are more likely to focus on each item and count meticulously. This method is also effective at uncovering discrepancies that might otherwise go unnoticed. The drawback is they can be more time-consuming and require careful planning to ensure that count sheets are accurate and up to date, but that’s a small price to pay for accuracy in our view, and why we recommend blind stock checks to anyone.
Stock counts are not just about tallying numbers; they’re about maintaining control and safeguarding your business from costly errors and inefficiencies. Through perpetual stock takes and strategic blind checks, you can stay ahead of the curve, catch discrepancies before they snowball and ensure that your stock control is accurate and reliable.
Stocktake Checklist To Prepare
Before the stocktake
- Set a date and time for the stocktake: Choose a time when the business is not busy, such as after hours or on a weekend.
- Notify staff: Whether you’re performing seen or blind stock checks, inform staff about the upcoming stocktake and their role in the process.
- Prepare stocktake sheets: Ensure you are using up-to-date stock records, as they’re going to be used to record your new count against what should be there. Your software system should let you print out your stock sheets easily. Then, label each sheet with the location of the stock to be counted.
- Organise the stockroom: This might seem obvious, but you don’t want this step to be an oversight and make the stocktake last longer than it needs to. Make sure the stockroom is clean, tidy and well-lit so you can make the process as efficient as possible.
- Isolate stock: Separate stock that has been received but not yet recorded in the system, as well as stock that has been invoiced to customers but not yet dispatched.
During the stocktake
- Assign counting teams: Divide the stockroom into sections and assign teams to count each section.
- Count each item individually: Do not estimate or guess the number of items. This includes counting all items in boxes, shelves and other storage areas.
- Record the count on the stocktake sheet: Write the count clearly and legibly.
- Double-check the count: Have another person count the same section to ensure accuracy.
- Reconcile the counts: Compare the counts from different teams to identify any discrepancies.
- Resolve discrepancies: Investigate and resolve any discrepancies that are found.
After the stocktake
- Review the records for any anomalies and discrepancies: Investigate any discrepancies between the physical count and the recorded amounts.
- Review the records for any reasons there may be a discrepancy: Identify potential causes of discrepancies, such as theft, damage, or errors in data entry.
- Keep an eye out for any obsolete stock that might need to be removed altogether: Identify and remove any obsolete or expired stock.
- Update your accounting records to show the real number of stock in hand: Adjust the inventory records to reflect the actual stock levels.
- Analyse the stocktake results: Use the stocktake results to identify trends, patterns and areas for improvement.
- Communicate the results: Share the stocktake results with relevant staff and stakeholders.
Additional tips for conducting a successful stocktake
Stocktaking Tools and Software
Various tools and software solutions can aid in the process of stocktaking, making it more efficient and accurate. One of the greatest tools a business can utilise is their accounting or ERP system; these tools can help you organise the stocktaking process, track counted items and generate reports to identify discrepancies and analyse inventory data – all whilst connecting to your financials, to give you an accurate view of your business for informed decision-making.
In summary, stocktaking is an essential practice for businesses of all sizes, providing valuable insights into inventory levels, preventing discrepancies and optimising purchasing, production and sales decisions. By implementing regular stocktaking procedures and utilising appropriate tools and methods, businesses can maintain control over their inventory and improve their overall financial performance.