What is a Stocktake? How to Do It in 2024?

A stocktake is when you count and check all the products, goods, or inventory in your business to ensure your inventory records are accurate. 

It's essential for product-based businesses to maintain optimum inventory levels as part of their inventory control. As a busy business owner, it's tempting to prioritise more enjoyable tasks over stocktaking. However, for businesses selling physical products online or in-store, stocktaking is essential to prevent loss.

This blog will explain how a stocktake can benefit your inventory management and how to carry one out.

Discover more about inventory management by exploring our guide to inventory reporting.

What Is a Stocktake? Why Is It Important?

Stocktaking, also called stock counting or inventory checking, is the process of manually checking, counting, and recording all the stock your eCommerce business currently holds in an inventory or warehouse. It also helps determine the value of your trading stock at the end of the financial year for business or tax purposes.

While stocktake frequency varies from business to business, it's typically done at regular intervals. After checking stocks on shelves, they are compared to data in inventory management software, followed by the creation of reports or analyses.

In Australia, it's a legal requirement for all businesses to account for their trading stock at the end and start of each income year. Even if not legally required, there are still important reasons to conduct a stocktake. 

Why is Conducting Physical Stocktaking Important?

Performing stocktakes can provide invaluable insights into your business. By evaluating your stock levels, you can determine:

• Any missing, stolen, damaged, or surplus stock.

• Discrepancies between your online stock and physical stock are especially important for online retailers.

• The cost of your stock, necessary for tax filing.

• Top-selling items, enabling informed purchasing decisions.

• Poorly performing items, prompting adjustments to inventory management.

• The efficiency of your demand forecasting and restocking processes.

• Perishable inventory nearing expiration.

• Opportunities to sell deadstock at discounted rates or give it away.

• Inventory levels necessary for Just-in-Time (JIT) delivery.

• Available-to-Promise (ATP) inventory levels. 

While your inventory system can address many of these issues, a physical inventory removes any uncertainty and helps maximise sales and minimise losses.

How to Stocktake in 2024?

Prepare for and take stock for your eCommerce business by following these steps:

1. Plan Your Stocktake Ahead

The first step is to choose a time and date for your stocktake. It's advisable to pick a quiet time to avoid distractions. Decide whether you'll close your business for a day or conduct the stocktake after hours. Consider scheduling it on your slowest days or outside regular business hours to minimise disruptions. 

Planning ahead also means your staff knows their tasks clearly. It helps avoid missing hidden stock, such as laybys or old stock and prevents confusing overlaps.

2. Organise Your Staff

Involving your staff in stocktaking helps them understand the importance of stock management. When delegating tasks for the stocktake, assign a supervisor to each section. Ensure all staff understand how to count the stock during the stocktake. For clarity, consider counting from top to bottom and left to right in the stockroom.

3. Know What to Count

Before beginning your stocktake, make a list of all inventory owned by your business and where it's stored. Ensure each SKU and unit is accurately categorised and labelled, either through detailed lists or physical sorting. Keep stockrooms organised and accessible, grouping items into categories. Staff should know to separate slow-moving, damaged, or obsolete stock for proper valuation or removal.

Set aside and exclude the following products from counting:

• Invoiced but undelivered stock.

• Inventory received but not yet recorded.

4. Keep Stock Rooms Tidy and Clean

The disorder can result in missed, lost, or double-counted items, leading to inaccurate results. So, prepare your stockroom by ensuring it is clean and organised. Make sure equipment and inventory are accessible before starting the count. Remove clutter and dispose of waste. 

Set aside damaged items and label them for separate counting. Organise your stock rooms to streamline the process, assigning areas for counted and uncounted inventory and labelling shelves and packages appropriately.

5. Be Fully Prepared With the Necessary Tools

Check and print the most up-to-date stock records, ensuring they're readily available for reference during the count. Gather all essential tools, including detailed stock sheets, pens, calculators, handheld barcode scanners, and clipboards. Make sure all items are easily accessible. Also, have your laptop ready if you're entering the results directly into your electronic stock register. 

Depending on your inventory management system, ensure you have suitable mobile devices for assistance during the stocktake count.

6. Start Counting Physical Stock

When counting, take your time and focus on one type of inventory item at a time. It's helpful to have another person perform an independent count to ensure accuracy. Avoid estimating quantities. Refrain from assuming that current stock reports are correct, especially if an item is challenging to count or access. The current numbers are likely inaccurate. Instead, meticulously record each item unit by unit to guarantee accuracy. 

Calculate inventory levels based on what is physically present rather than relying solely on labels. Thoroughly inspect all areas of the stockroom to ensure nothing is overlooked. Lastly, check for any new orders before finalising the count.

This process may take the majority of your stocktake time. After completing the count, compare the figures with those recorded in your system to evaluate accuracy.

7. Verify Stocktake Results

Once you've finished stocktaking, double-check the results against your initial stock records. Look for any anomalies or discrepancies. If there are inconsistencies, investigate why. 

It could be due to unprocessed goods received notes, misplaced items, or even theft. Once you identify the cause, take action to prevent it from happening again, such as process improvements or increased security measures.

8. Update Your Accounting Records

After completing the post-count review, promptly update your inventory records. This ensures accuracy and keeps your records up to date, which is essential for effective stock management.

9. Maximise the Value of Your Stocktake

After accurately counting and pricing your stock, it's vital to leverage the gathered information effectively. Review the stocktake results to pinpoint areas for stock management improvement and inform your retail planning and strategy. 

By understanding your inventory levels and requirements, you can easily detect and monitor slow-moving, profitable stock and potential theft within your eCommerce business. 

Regular stocktakes also help streamline warehouse receiving procedures and enable more efficient handling of stock issues.

13 Reasons Why You Have Stocktake Inconsistencies

Stocktake discrepancies happen when the actual inventory doesn't match what's recorded in inventory management software. As an eCommerce retailer, it's crucial to address stocktake discrepancies promptly to prevent lost sales, overstocking, and customer dissatisfaction.

We've identified 13 common causes of these discrepancies, and the next section will guide you through effectively resolving them.

1. Miscounts or incorrect data entry during the stocktake process.

2. Incorrect unit of measurement used during counting.

3. Misplaced, missing, or mislocated stock.

4. Failure to identify damaged items.

5. Theft, shrinkage, or unauthorised removal of inventory.

6. Poor management of damaged and returned inventory.

7. Glitches in the inventory management system.

8. Mislabeling of stocks.

9. Mixing up stocks with similar products.

10. Errors during picking or order processing.

11. Inadequate training or supervision.

12. Supplier scams or fraud.

13. Missed recording of incoming or outgoing items.

10 Best Practices To Avoid Stocktake Discrepancies

The best way to address stocktake discrepancies is to prevent them from happening in the first place. Here's how—

1. A good starting point would be to recount the stock. If the numbers don't match up, a miscount may be the issue. 

2. Review your inventory management system for any data entry errors, especially in your purchase history.

3. Search for the stock in another location. If you're missing a significant number of items during the count, they might have been mistakenly placed in the wrong location.

4. For product stock, verify if any customer returns have been received but not accurately entered into your inventory system.

5. Verify if you have received the stock. Sometimes, you might mistakenly mark stock as arrived when it's still on order from the vendor.

6. Ensure that the SKU or other identification number matches the item correctly and has been correctly labelled.

7. Confirm that the count matches the measurement unit used to record inventory levels. Inform your staff about the appropriate unit of measurement before they commence counting.

8. Watch out for mixed products. Small differences in variations like size or fragrance often lead to counting errors, where the wrong product is tallied, or variations are grouped instead of being counted separately. Also, make sure your staff counts each product correctly and doesn't confuse it with a similar one.

9. Check for overdue orders. You might have unfulfilled orders that were billed but have yet to be picked. Utilise your inventory management software to locate any outstanding orders and ensure they are not included in the count.

10. Examine the possibility of employees or customers taking stock home. While unpleasant, this step is necessary if all other potential causes have been eliminated.

Advantages and Disadvantages of Stocktaking

Once you begin effectively managing your stocktakes, you'll start to see the benefits of your efforts. Here are just a few of the benefits and challenges you can expect:

Benefits of Stocktaking

1. Real-time Stock Levels

Stocktakes provide clarity on available stock levels. You gain insights into your current inventory and safety stock, enabling better decisions on production and purchasing. This helps prevent overstocking or understocking and optimises reorder points.

2. Accurate Asset Registration

Stocktaking ensures precise recording of inventory on the balance sheet, which is crucial for financial accuracy. This clarity influences financial audits, detecting asset gains or losses effectively.

3. Enhanced Profitability

Stocktaking improves profitability by offering a clear view of inventory levels and sales performance. It helps identify issues promptly, reduce losses and waste, and maximise profit margins.

4. Identify Fast-moving and Slowing Items 

Stocktaking enables informed decisions by revealing which products sell well and which don't. It helps in identifying slow-moving items and making strategic decisions to optimise inventory and maximise profits. 

5. Pricing Decisions

Stocktaking allows for comparing current purchase prices with previous ones, aiding in evaluating market changes and their impact on margins. It keeps you informed so you can make timely decisions, such as adjusting pricing strategies or making earlier investments.

6. Efficient Management of Seasonal and Expiring Stock

Stocktaking enables timely monitoring of seasonal and expiring stock, which is crucial for maximising sales and minimising losses. It provides complete visibility into inventory, preventing profit loss from expired or obsolete items and freeing up warehouse space.

Challenges of Stocktaking

1. Accidental Damage

There's a risk of accidental damage during stock handling. This could include items being dropped, mishandled, or damaged during the counting process. Conducting stocktakes can be especially challenging in hard-to-reach locations or cramped warehouses with densely packed products.

2. Extra Employee Costs

Hiring additional staff to assist with the stocktake incurs additional labour costs. These employees may be needed to help with tasks such as counting, organising, and verifying inventory.

3. Lost Income

Devoting time to conducting a stocktake means diverting resources away from revenue-generating activities, such as selling goods or providing services. This could lead to a temporary decrease in income during the stocktake period.

4. Prone to Errors

Manual processes, as we know, are inherently error-prone. Prolonged work in your warehouse increases the likelihood of unintentional errors occurring.

Conclusion

Regular stocktakes conducted in this way help streamline processes, maintain inventory accuracy, and align inventory orders with customer demand and inventory data. This ensures that your investments are profitable and well-informed.

Stocktake Overwhelm? Partner with PACK & SEND!

Stocktaking can be a hassle and takes a lot of time. However, regular stocktaking is essential for maintaining accurate inventory records and optimising logistics processes. How about taking a bigger and better approach, like outsourcing to a trusted 3PL like PACK & SEND? 

At PACK & SEND, we prioritise precise inventory management for efficient supply chain operations. Our solutions offer flexibility and responsiveness for receiving, storing, packaging, and distributing your products. Enjoy fast delivery, customisable packaging, and dedicated support. With advanced technical capabilities and a dedicated dashboard, we streamline your order fulfilment process. You can seamlessly integrate with various sales channels to scale your business effortlessly.

Contact us today to explore how PACK & SEND can assist you with inventory management, order fulfilment, and micro-fulfilment for your online store. 

Frequently Asked Questions (FAQS)

What is a stocktake, and why is it important?

Stocktaking, also known as inventory counting, is physically verifying and counting the quantities of items in a business's inventory. It is essential for maintaining accurate records, optimising inventory levels, and preventing stockouts or overstocking.

How often should I conduct stocktakes?

The frequency of stocktakes depends on various factors, including the size of your business, the nature of your inventory, and your industry regulations. 

Generally, businesses conduct stocktakes—

• Periodically, such as monthly, quarterly, biannually, or weekly

• Annually, for non-perishable goods

• Continuously for larger enterprises and those dealing with perishable items, such as restaurants and food processing units.

How do I perform a stocktake?

To perform a stocktake, begin by planning and scheduling the event. Gather the required supplies and equipment, then organise the stockroom for efficient counting. Assign roles and responsibilities to staff members to ensure a smooth process. Conduct a physical count of the inventory, double-checking counts for accuracy. Update inventory records based on the count and review the process afterward for any possible improvements.

How can I integrate stocktaking with my overall business strategy?

Integrating stocktaking with your business strategy involves using the insights gained from inventory counts to inform decision-making, such as purchasing, pricing, and marketing strategies. By aligning stocktaking with your business goals, you can optimise inventory levels, reduce costs, and maximise profitability.