How to do a stocktake

business.gov.au describes a stocktake as a physical count of your stock that shows whether the items you have on hand match your inventory record. Its glossary adds that the point of the physical count is to check the stock records and the accounts.

business.gov.au describes inventory, also known as trading stock, as the goods and materials a business buys or makes in order to sell or exchange them. It names the main types as raw materials, work in progress and finished goods. If you hold more than one type, count and record each separately, because each sits at a different stage before sale.

business.gov.au says a stocktake helps you:

• spot missing or stolen items early
• find stock that is broken, out of date or can't be sold
• get ready for a sale or a move
• support an insurance claim
• manage stock levels so you neither overstock nor run short
• use your space better, for example by moving top sellers to where they are easy to reach.

It says most businesses do one monthly or quarterly. A business with fast-moving or valuable lines may also count those items more often than the rest.

How you track stock between counts changes what the stocktake tells you. business.gov.au describes two kinds of tracking system:

• Periodic: you count stock by hand and update your records manually, in a spreadsheet or on paper.
• Perpetual: software or a point-of-sale system updates your records automatically each time you buy or sell something.

With a periodic system, the records depend on manual updates, so the count is the main check on them. With a perpetual system, the records change with every transaction, and the stocktake checks them against what is really on the shelf.

Either way, business.gov.au says to capture every sale and return in your records. Up-to-date records make the stocktake easier and help you catch errors and faulty products as they happen.

A count is only useful if it describes one moment in time. Before you start:

1. Pick a time when stock isn't moving, such as after close of trade or before opening.
2. Record every sale, return, purchase and delivery up to that point, so the records and the shelves describe the same moment.
3. Keep goods that are sold but not yet collected apart from the count, and hold any delivery that arrives during it until the count is finished.
4. Tidy and group stock by location and category, so each item is in one place.
5. Prepare count sheets or a scanner list with each item's code, description and location and a space for the quantity. Leaving off the expected quantity stops counters from simply confirming it.
6. Divide the premises into areas and give each area to a counter or a pair of counters.

1. Count one area at a time, and mark each shelf or bin as done.
2. Record each quantity in the unit you stock the item in, such as single items, packs or cartons.
3. Note damaged, expired or unsaleable stock separately rather than mixing it in with saleable stock.
4. Recount a sample of items, plus anything of high value, using a different counter where you can.
5. Leave stock where it is until every area has been counted.

Keep the signed count sheets. They are the record behind any change you make to your stock figures.

Line up the counted quantity of each item against the quantity your records show. Most items should agree, and the ones that don't are where the work is.

For each difference, look for the cause before you change anything:

• Recount the item, in case the count itself is wrong.
• Check for sales, returns or deliveries recorded on the wrong day or not recorded at all.
• Check for data entry mistakes, such as a wrong item code or quantity.
• Look for damaged or expired stock that was thrown out without being recorded.
• If nothing explains it, record an unexplained shortage or overage, according to whether the count is below or above the records. Watch for recurring differences from one count to the next.

Then update your records to the counted quantities, with a note of each adjustment and the reason for it. business.gov.au makes the point that updating your records after changes means your next stocktake starts from the right figures.

business.gov.au suggests comparing your current and previous stocktake numbers with your sales records. That shows which items sell quickly after you restock them, which haven't sold at all, and which are essential to the business.

It suggests using what you find to:

• order more of your bestsellers
• run a sale on slow-moving items
• retire stock that isn't selling well
• remove outdated stock, such as expired products or ended lines.

The results are also a prompt to check your reorder points. business.gov.au describes a reorder point as the smallest amount of an item you want in stock before you order more. You set it from how quickly the item usually sells and how long new stock takes to arrive, allowing for busy times of year, supplier reliability and upcoming sales.