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Planning For A Painless Stocktake

If you sell or make products then you’ll likely have stock on hand or work-in-progress at year end. In order to get accurate figures for your tax and annual financial statements, you’ll need to know the value of this stock. This means you’ll need to do a stocktake.

The end of the financial year (EOFY) comes around like clockwork but for many business owners it can be a stressful time. It doesn’t have to be with the right planning. Planning your stocktake in advance  can save you time and stress and is the best way to ensure that your closing stock figure is accurate and that you aren’t under or over declaring your business performance and financial position.

An EOFY stocktake will show you how much of your capital is locked up in stock. This is a serious consideration for cashflow and will inform your budgets for stock ordering for the year ahead. When planning your stocktake, you should also plan to follow it up with your annual business plan and cashflow forecasting. This will help to inform your overall strategy and help you make sure you are carrying the right amount of stock.

The closing stock figure you get with your stocktake has a big impact on your taxable profit. This means it has tax implications as well as effecting your KPI‘s by making an adjustment to your Gross Profit Margin. This means it really important to get it right. If you need a hand, get in touch with our expert bookkeepers or tax advisors, they can give you some tips tailored to your specific requirements.

With the right plan, help and advice, your stocktake can be painless.

Plan For Stocktake Success

Successful, painless and accurate stocktakes don’t just happen, you need to plan.

The first thing to consider is timing. When you do your stocktake is important. For tax purposes, your end of year stocktake needs to be done reasonably close to your financial year balance date. This is so that you get an accurate and relevant figure for your financial statements. However, you need to select a time that has the least possible impact on your business. It may be that you need to close up early or open late and put in some extra work on stocktake day to make sure you get everything you need done while not impacting your customers too much (and missing sales!).

To keep track of stock throughout the year and make each stocktake easier and less of a ground-up exercise, we recommend planning mini-stocktakes throughout the year. Your end of year stocktake will then be based on more up-to-date figures and should be less of a chore. Software like Vend makes it easy to run partial stocktakes.

Get The Right Software

These days there is a niche piece of software to simplify every part of your business. Your stock is likely one of your biggest assets so deserves a dedicated, expert solution. Using inventory management software makes monitoring stock a breeze throughout the year. Solutions like Vend and Dear are worth the investment. They allow you to get accurate information in a timely manner and make informed decisions.

Get The Stocktake Team Together

If you have a lot of stock, getting some help will make things a lot easier. If you have staff then it makes sense to use them. They know your business and your products so they will be able to spot things that are out of the ordinary, damaged or obsolete. Using your own staff is likely more expensive than using students or other casuals but you’ll often get a better and more reliabel result, allowing you to make better informed business decisions.

Clear The SLOBs

March is often full of stocktake sales. There’s a simple reason for this, stores want to clear their SLOBs while optimising their tax and financial positions.

SLOBs are your SLow-moving and OBsolete stock. This is the stock you really don’t want to carry through to next year and is a much greater benefit to you converted to cash. Carrying too much stock isnt a good thing for many reasons. Holding stock that isnt selling takes up space in your warehousing and shop floor. This costs money in lease and other overheads for every day it sits there. There is also a daily risk that items get damaged and their realisable value decreases as a result. There’s also an added benefit, it’s also a lot easier to count less stock.

Sort Out The Stock Room

When you first set up your store you probably had a meticulous warehousing layout. However, as soon as the orders start flowing the order tends to go out the window. Its common for stock rooms to devolve into a bit of a mess with the same items stored in several different locations. This can be an expensive issue as its harder to fulfill customer orders on time, its harder to monitor stock levels and you’re more likely to order replacement stock that you don’t actually need.

To make your stocktake easier, quicker and more reliable, invest some time in making sure your stock room is well organised.

A well organised stock room not only speeds up stocktake but also speeds up order fulfillment and monitoring for the right time to order replacement stock.

Verify Your Purchase Data before Stocktake

Take some time to look through your inventory system and check that the cost prices you have recorded are accurate.

If you import stock, ensure you have accounted for the full imported cost, including customs charges, duty and currency fluctuations.

Store Sold Or Shipping Stock Separately

If you’ve sold something and the customer has paid for it, it shouldn’t be included in your stocktake. This is another reason why you need to sort out your stock room before stocktake.

Items that are sold should ideally be stored in a separate area of your stock room so that you can ignore them easily during stocktake.

Count Everything

Accuracy is essential. Your stocktake determines the value of your stock that is deducted from your direct costs. This increases your taxable profit. It is tempting to simply make a guess, especially if the total value of your stock is below $10,000 and you are allowed by the IRD to make an informed estimate rather than do a physical count.

Taking the time to do a physical count is a valuable exercise for your business. It informs you what is selling and what is just sitting on shelves, it lets you confirm that you do in fact have exactly the products that you think yo do but most importantly, it makes sure you pay the exact right amount of tax you need to.

Count every item. Open boxes to check the correct stock in in there (and isn’t damaged). Mark off the sections that are counted but leave a note pad there to record any movement of items out while the stocktake is underway.

Review Everything

Once in a blue moon, a physical stocktake matches perfectly to your industry software. In most cases, there are variances. If the variance is material (more than a certian percentage you deem to be significant) then recount the stock affected to double check.

Missing stock can be cause by any number of issues. These could be simple accounting errors, software coding errors or even theft. Regular partial stocktakes can be an early warning system for issues in your business, allowing you to make any required changes before they become serious issues in a years time. This could be implementing better warehousing, security or ordering process.

Start Planning For Next Years Stocktake

Every stocktake is a valuable learning experience. It can help to inform your stock purchasing for the year ahead but also the way that you store and move stock through your business. Use it as a time to optimise your stock room layout, establish efficient and simple systems for partial stocktakes throughout the year, and up-skill yourself and any staff on best practices with stock ordering, dispatch and warehousing.

If you would like to discuss your options for more efficient business systems, software or processes with your stocktake, get in touch with the team at MBP. Our Business Support Administrators, Business Advisors and Accountants can help your to plan for a painless stocktake. It might seem like a chore, but it can be a really valuable exercise when done properly and with the right support.

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