In retail, especially in large warehouses storing tens of thousands of items, inventory errors are common. Sometimes one product is shipped, but another is written off, damaged goods are overlooked, or incorrect quantities are recorded during receipt. No business is immune to such errors.
This is precisely where stocktaking becomes essential. It allows companies to see the actual state of inventory and identify discrepancies in records. In today’s article, we’ll explain what stocktaking is, how to conduct it effectively, and which steps can help streamline the process to ensure inventory checkings are always accurate and well-coordinated.
What is Stocktaking?
Stocktaking is the process of verifying and recording the actual presence of goods, materials, and other company assets. Its primary purpose is to compare real inventory levels with the data recorded in accounting systems. This helps identify discrepancies, prevent losses, optimize stock levels, and improve the accuracy of financial reporting.
The stocktaking process can involve both manual counting and the use of automated systems, which is more efficient, especially for companies with high product turnover. The frequency of such checks depends on the type of business: large enterprises may conduct stocktaking monthly or quarterly, while companies with smaller inventory volumes may do so annually or as needed.
What is the Purpose of Stocktaking?
Stocktaking enables a company to maintain control over its assets and optimize inventory management. It is aimed not only at verifying the alignment between actual stock and recorded data but also at improving overall operational efficiency. Regular stocktaking helps minimize losses, increase record accuracy, and promptly identify weaknesses in operational processes.
Key objectives of stocktaking:
✔ Determines actual stock levels: Stocktake allows a company to know exactly what inventory is currently available, helping to avoid shortages and overstocking when replenishing supplies.
✔ Updates data in accounting systems: Regular inventory checkings ensure that information in the system is current, which is crucial for accurate purchasing planning and product distribution.
✔ Assesses losses and monitors quality: Stocktaking helps identify losses related to damage, expiration, and deterioration of product quality. This allows for timely responses to such issues and minimizes losses.
✔ Eliminates misplaced items and surplus: Regular stocktake helps identify excess or misplaced items in the warehouse, allowing for quick corrections that reduce storage and handling costs.
✔ Increases employee accountability: Regular checks motivate staff to adhere more closely to storage and accounting procedures. This fosters orderliness in the warehouse and enhances overall team discipline.
Who Should Conduct Stocktaking?
Stocktaking is typically conducted by a commission specifically appointed by the company’s management. This commission may include representatives from various departments, ensuring objectivity and accuracy in the assessment.
In small companies, stocktaking may be carried out by one or several employees, depending on the volume of goods and internal resources. It is important that the composition of the commission is approved in advance and that each participant knows their responsibilities. This ensures the efficiency of the process and the accuracy of the results.
Depending on the scale of the stocktake, inventory managers or warehouse supervisors may be responsible for it. In larger companies, where nearly the entire team is involved in the verification, the results are more often overseen by the company’s management.
Three Main Methods of Stocktaking
There are several methods for conducting stocktaking. Each of them is suitable for different types of businesses and inventory volumes. Depending on the characteristics of your product range, sales frequency, and your company’s objectives, you can choose one of the following methods:
1. Complete stocktaking
Complete stocktaking is a method in which the entire range of a company’s stocks and assets is checked. It is conducted infrequently, at least once a year, as it requires substantial time and labor resources. This method is more suitable for small companies that can afford to halt operations entirely during the stocktake process.
2. Cycle counting
The cycle counting method involves regular checks of specific categories of goods or warehouse zones throughout the year. Items are counted according to a predetermined schedule, allowing data to remain current without halting all operational activities. The schedule is created based on the company’s priorities, with higher-value or fast-moving items checked more frequently.
These regular checks enable timely recording of changes, which is important for companies with a constant turnover of goods. Inventory information is always up to date, minimizing the likelihood of sudden shortages.
The cycle counting method is effective for large warehouses with a high volume of items and active product turnover. It reduces the burden on staff and allows for discrepancies to be identified before they lead to serious consequences.
3. Sample checking
Like cycle counting, sample stocktaking involves only certain units of goods or specific categories. This method allows for a quick assessment of inventory accuracy without consuming much time or resources. It is especially beneficial for companies that want to regularly monitor stock levels but cannot conduct large-scale checks.
Sample stocktaking is often used to identify problem areas in the warehouse or to verify accuracy in critical categories of goods. These checks can even be conducted daily if current automation allows for it.
How to Take Stock of Goods?
Poorly organized stocktaking can lead to inaccuracies, losses, and additional costs. To ensure the process is effective, it is essential to follow a specific order of actions:
Plan the stocktaking in advance
Develop a stocktaking plan: specify what will be checked and within what timeframe. Do you want to review all assets or conduct a sample count, identify losses, or adjust stock levels in the system? Understanding the end goal will help define the scope of work and necessary resources.
Schedule the date and time for the stocktake, taking into account the warehouse and staff work schedules. Assign responsibilities for key stages of the process, including preparing the warehouse, counting, reconciling data, and updating the inventory system. A clear distribution of responsibilities will reduce the likelihood of errors and speed up the process.
Prepare your warehouse and necessary tools
Before starting the stocktaking, it is essential to organize the warehouse. Place items in their correct locations, group them by category, and move obsolete or outdated items to a separate area. This will simplify access to the necessary items and help the team navigate more quickly during the counting process.
Ensure that the aisles in the warehouse are clear and wide enough for staff movement. Create designated zones for handling bulk items or separate areas for stocktake fast-moving items in advance. This approach will reduce the time spent moving around and enhance the safety of the participants in the count.
Also, gather all necessary tools for inventory checking: barcode scanners, scales for items with precise specifications, calculators, counting sheets, and markers. Having all the tools readily available will help speed up the process and avoid unnecessary delays.
Organize your personnel
Organizing personnel is one of the key stages of successful stocktaking that directly impacts the speed and accuracy of the count. A clear distribution of roles and tasks will help avoid confusion, duplication of work, and reduce the likelihood of errors.
Assign specific areas or groups of items to employees to prevent overlap in their work. This will expedite the process and make it easier to ensure that every location and item is accounted for.
If the warehouse is large, set up a communication system for efficient information exchange: radios, mobile chats, or groups can help reduce movement time and speed up interaction between staff.
Conduct a preliminary analysis of your inventory
Review records and accounting data to identify potential inaccuracies or areas that require special attention. This will provide insight into possible discrepancies and make their identification easier during the stocktaking process.
Count all physical inventory
After the preparatory stages, proceed to the main task—counting the current stock in the warehouse. Record data for each item, cross-referencing it with previous inventory records. You can maintain the inventory list in a spreadsheet or use a barcode scanner or RFID for a more efficient and quicker count. At this stage, attention to detail and consistency are crucial to avoid missing any items.
Verify and recount identified discrepancies
All discrepancies identified during the verification process require a separate recount to confirm the accuracy of the data. You can involve other employees in this process to eliminate subjective factors and random errors. The recount will help determine whether the discrepancies are due to mistakes made during the stocktaking process or if they reflect real inventory management issues.
Document the results of the stocktaking
Upon completing the stocktaking, update the records according to the results. Make adjustments, write-offs, or reallocations of goods. This ensures that all your records align with the actual state of the inventory.
In the event of identified issues in the inventory management, it is also important to document the measures taken to address them. For instance, if discrepancies are discovered, develop a plan to prevent such occurrences in the future, improve storage conditions, or increase the frequency of checks.
Conclude the stocktaking by having the results confirmed and signed by the responsible parties. This will add validity to the document, formally complete the process, and confirm that all participants agree with the findings.
Common Mistakes Companies Make During Stocktake
In practice, employees often make mistakes that can compromise the quality of stocktaking results. From rushing to improper organization of the process, the reasons for these errors can vary. However, they can be avoided by proactively considering potential risks. Below, we list the most common mistakes encountered during the organization and execution of stocktake.
Compressed deadlines for stocktaking
Too short deadlines for stocktaking will limit employees’ ability to conduct thorough counting and data verification. In a hurry, the risk of errors increases, as well as oversight in categories that require special attention. Allocate enough time, especially when dealing with large volumes.
Absence of a responsible person for material assets
When there is no one in the team responsible for stocktaking, the process can lose organization and transparency. The absence of a specific person to oversee accounting and analysis increases the likelihood of errors on the part of employees.
Recounting during ongoing movement of goods
If stocktaking is conducted in an active warehouse where goods are being received or shipped at the same time, the likelihood of discrepancies increases. This complicates counting and leads to a greater number of accounting discrepancies. Suspend warehouse operations during the stocktake or conduct it outside of working hours.
Lack of breaks for the team
Stocktaking requires high concentration. The lack of regular breaks can lead to employee fatigue and decreased accuracy in accounting. Short breaks will help maintain focus and improve the quality of the stocktake.
Ignoring stocktaking results
To minimize risks and enhance efficiency, it is important not only to conduct stocktaking but also to thoroughly analyze the results and take appropriate measures. Companies often overlook this aspect, leading to the accumulation of excess or obsolete inventory. As a result, goods occupy additional warehouse space, increasing storage costs.
Lack of automation
Manual data entry increases the likelihood of errors: typos, omissions, or incorrect entries can significantly distort the actual state of inventory. These errors may go unnoticed until serious issues arise with accounting and reporting. To minimize such errors and expedite the counting process, use digital tools such as scanners and automated accounting systems.
How to simplify and expedite the stocktake process?
Stocktaking requires significant time and labor resources. However, there are methods that help simplify and expedite the process while ensuring its accuracy. Here are some recommendations to help you achieve better results:
Use barcoding for quick identification
Barcode scanners significantly reduce the time spent on counting and minimize the risk of errors. Automatic data reading speeds up the process, simplifies counting, and allows for immediate data transfer to the accounting system.
Give the team time to rest
Regular breaks will help the team maintain focus and avoid fatigue, which often leads to errors. Even a short rest improves concentration and helps conduct stocktaking faster and with higher quality.
Create an environment for focused work
During the stocktake, it is important to minimize distractions: set aside gadgets, reduce unnecessary movement in the warehouse, and create conditions for the team to work focused. This will allow for completing the stocktaking faster and with fewer errors.
Ensure order in the warehouse
A well-organized warehouse will facilitate access to goods and speed up their counting. Regular tidying will help employees quickly navigate the location of items, saving time during the stocktaking process.
Make the most of the team’s resources
When dealing with a large volume of inventory for the stocktake, it’s advisable to involve as many employees as possible. This will help speed up the process. Each checker should know their role to avoid overlaps and duplication of tasks. Coordinated teamwork will enhance the efficiency and accuracy of the stocktaking.
Automate accounting with digital tools
Automation significantly enhances the efficiency of stocktaking, reduces the number of errors, and saves time. Modern inventory management systems offer various features that help simplify accounting and optimize processes.
One such tool is the Ysell.pro inventory management system. Our platform offers users a wide range of capabilities:
✔ Tracks the quantity of goods in the warehouse in real time. This means that when goods are received or shipped, the data is instantly updated in the system, eliminating the possibility of errors associated with manual entry.
✔ Supports integration with barcode scanners. This allows for quick item registration, reducing the time spent on manual counting and minimizing errors.
✔ Generates detailed inventory reports. This enables management to quickly analyze the warehouse status, identify obsolete items, and make informed decisions regarding inventory optimization.
✔ Supports multi-user mode. Collaborative work on stocktaking significantly speeds up the process and improves team interaction.
Stocktaking is an important step toward effective inventory and asset management. A proper approach to this process will help your company minimize costs and increase profitability. After all, effective stocktake is not just a formality; it is the key to a successful business that enables informed decision-making and sustainable growth.
Frequently Asked Questions
1. What is another term for stocktaking?
Synonyms for the term ‘stocktaking’ include:
✔ Taking stock
✔ Stocktake
✔ Stock control
✔ Inventory checking
✔ Inventorying
✔ Stock surveying
✔ Inventory assessing
✔ Stock checking
✔ Inventory checking
✔ Stock counting
2. When is the time to conduct stocktaking?
Stocktake should be conducted in various situations, including:
✔ at the end of the financial year for reporting purposes
✔ before scheduled audits
✔ after major deliveries or shipments
✔ when discrepancies in accounting are identified.
3. How long does stocktake last?
The duration of stocktaking depends on the size and complexity of the warehouse, as well as the quantity of goods and the methods used. For example, a manual count in a small retail store may take about 2 days. In the same store, automated accounting using a barcode scanner takes half a day.
4. How often should stocktaking be conducted?
The frequency of stocktaking depends on the specifics of the business and the turnover of goods. A complete stocktake is conducted at least once a year, while spot checks are done quarterly or monthly. Companies with high turnover may conduct checks even more frequently to promptly identify discrepancies and optimize inventory management.
