What is a stocktake?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
A stocktake is a physical check of the stock a business holds, counting each item and comparing the totals with the stock records to confirm what is really on hand. Differences are investigated and the records corrected. The count also shows damaged, out-of-date and slow-selling items, and supplies the quantities used to work out the period's closing stock figure.
A gap between the counted quantity and the recorded one is either a shortage, where fewer items are found than the records show, or an overage, where more are found. Shortages can come from theft, breakage, waste that was never recorded or a sale that was never entered. Overages can come from a delivery or customer return that was never entered, a sale entered twice, or items recorded under the wrong code.
Some businesses count everything at once, outside trading hours. Others count one section at a time through the year, sometimes called cycle counting, so that every item is counted over a period while trading carries on. A full count at the end of the financial year gives the quantities behind the closing stock figure in that year's financial statements.
The count matters to profit as well as to stock control. Closing stock is taken away when working out cost of goods sold, so if a storeroom is missed, closing stock is too low, cost of goods sold too high and profit understated. Counting the same shelf twice has the opposite effect.
In Australia
business.gov.au's inventory guidance explains a stocktake as a count of the stock on hand to see whether it agrees with your inventory record, and notes that most businesses count monthly or quarterly. Its glossary calls stocktaking a physical count of merchandise and supplies that verifies both the stock records and the accounts.
Its guide to preparing for a stocktake weighs the costs of a count against its benefits. Handling stock can damage it, extra staff may be needed and selling time can be lost. On the other side, a count helps you understand your stock levels, find what to reorder, detect theft and gaps, reduce slow-moving stock and review your pricing.
To keep a count organised, it suggests planning ahead with stocktake sheets ready and staff told what to count, considering a count outside business hours, putting one person in charge at each stocktake location, and running a stocktake sale beforehand to bring stock levels down.
Worked example
| Item | Difference (units) | Cause found |
|---|---|---|
| Dry dog food, small bag | 4 short | Torn bags thrown out without being recorded |
| Cat litter | 2 over | Customer return never entered |
| Dog lead | 1 short | No cause found, recorded as a shortage |
| Fish food flakes | None | Count matched the records |
| Bird seed | 6 over | Delivery entered under the wrong item code |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Counting while customers are buying and deliveries are arriving, so the count does not describe a single moment.
- Correcting the stock records to the count before looking for what caused each difference.
- Expecting only shortages, when a count can also come in above the records.
- Missing stock kept away from the main shelves, such as in a back room, a vehicle or a second shop.
Related terms
Related service
Small business bookkeeping
Your books kept current, every month.
Sources
- Manage your inventory
business.gov.au, Australian Government. Current at 16 October 2026, released 19 November 2025. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Prepare for stocktake
business.gov.au, Australian Government. Current at 16 October 2026, released 11 July 2024. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.