What is a Stock Count?
A stock count is the process of verifying the value of the inventory that your business has on hand, at cost price on a particular date (typically your company's year end).
Steps you can take include:
- Plan the stock count: Set a time for the stock count that is convenient for your business for example during the quietest time of the day or outside of business hours. Your company's year end date will usually be the best date to undertake this task, but you may also decide to do this quarterly throughout the year. Determine who will be responsible for conducting the stocktake and ensure that they are trained and prepared for the task.
- Organise stock counting tools: Gather all the necessary tools and supplies, including stocksheets, pens, clipboards, scales (if applicable), handheld scanners (if applicable), and any other relevant items.
- Prepare your stockroom: Ensure that the stockroom is readily accessible, organised and tidy. Label shelves and create well-defined sections that stock should be stored in. Ensure package labels are clear and pre-count items into lots if you are counting large quantities of any stock items.
- Categorise your stock: Remove stock that has been purchased by the customers and excluded from your stock count. Ensure that staff identify damaged, slow moving, or obsolete stock so it can be valued at a discounted price or completely removed from the stock count.
- Define your methods: Create a clear system and explain how you would like your stock to be counted. Consider doing the stock count in pairs and ensure the staff know which sections they will be counting and in what order. Mark off completed sections with a coloured pen or marker to prevent double-counting and ensure that all items are accounted for.
- Check for variances: Compare the stock count with the actual stock levels recorded in your inventory system (if you have one) and identify any variances between the two counts. Investigate the reasons for variances, this could include items marked with an incorrect label, stock stored in multiple locations, records not written off correctly, stock counted multiple times, invoices not yet received, and dispatches not yet processed. Conduct a recount if the variances cannot be explained.
The end result should be a report that lists all the inventory held by the business on the stock count date, at cost value. This will allow us to accurately calculate the profits earned that year by the business, and therefore calculate your taxes correctly.