Top Tips For Efficient Stocktaking

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Stocktaking

What is Stock Taking?

Stocktaking is simply the counting of every single product you sell and categorizing them item-wise.

For example, a textile manufacturer or trader will categorize products something like this: shirts, jeans, t-shirts, dresses, children’s clothing, etc.

Once the counting is done, the usual procedure is to verify the count by comparing it with the inventory as shown in the computer system.

It is required to be performed for the annual audit of a company or store, and often as a periodic inventory checking.

To put it in short, stock-taking generates a document which is a summary of the different inventory items with their quantities as on a particular date.

Stocktaking is pretty labor-intensive, and time-consuming too, so companies put it off as much as they can.

You need to remember that while both stock and inventory are used interchangeably, there is a difference; inventory includes everything like your raw materials, finished products, accessories, packaging, office stationery, and so on.

Stock, however, refers only to the finished products that you actually sell in your business.

ALSO READ: A Detailed Guide to Batch Tracking

What is Cycle Counting?

In cycle counting, a specific portion of your inventory is checked on specific days, rather than taking one single count in a year of your entire stock.

This process breaks the stocktaking down to multiple small stocktaking activities.

This offers a few advantages over conventional stocktaking; the biggest one is avoiding the disruption associated with company-wide annual counting.

Therefore, cycle counting is preferred by large businesses that are unable to completely close down their operations.

It also helps to eliminate big variations in actual and system count – which happens when stocktaking happens after a long gap.

But you need to bear in mind that this is a complicated process that depends on accurate inventory systems to work properly.

Many businesses rely on a hybrid system – a mix of cycle counting and traditional stocktaking, till they are absolutely sure that moving away from the conventional system will not cause them any problems later.

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Why is Inventory Stocktaking Important?

Why inventory stocktaking is important

Any business that deals in products must ensure that their stock levels are absolutely accurate every now and then as part of inventory control – in certain countries, it is part of regulatory compliance.

Here are three main reasons you must regularly check your stock:

1. Determine How Efficient your Inventory Tracking is

Complete dependence on the software system for stock level accuracy is not a good idea.

Physically taking stock allows you to check the accuracy by comparing your count with the system figure.

This helps you to recognize the anomalies and resolve them before they become big problems.

If the tracking of your goods isn’t as proper as you believed. If you don’t resolve issues early, you may face problems like:

  • Overstocking – having too many products on hand
  • Stockouts – having no products to sell
  • Deadstock – products becoming obsolete and lying unsold

ALSO READ: How Does Landed Cost Affect the Cost of Inventory?

2. Identify Stock Problems

Robust cloud ERP like Tranquil has an efficient inventory module that helps you to track the levels and locations of your products, but you still need to perform manual checks to identify transit problems and so on.

Stocktaking helps to identify problems that the software may miss, like missing orders.

3. Ensure you Meet Targets

It is never a good idea to leave anything to chance when it comes to monitoring business performance.

For example, to calculate inventory turnover and other important key metrics, you need figures that are 100% accurate.

You can easily tweak your plans and procedures to enhance efficiency and boost profitability when you are sure about your inventory performance.

For instance, you could:

  • Decrease the safety stock level you keep with you for emergencies or demand surges
  • Change product prices to ensure a quick sale of products

Stocktaking and Your Inventory System

The importance of stocktaking and the extent of disruption caused by the activity in your business depends on the inventory system you employ.

Where the period system is followed, there is total reliance on stocktaking to have visibility regarding current levels.

Recording stock could mean closing the business for a day or two or paying staff overtime to work after hours.

Cyclic counting however can render the process less disruptive.

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How to Perform Stocktaking?

How to Perform Stocktaking

Any business that does stocktaking should follow certain steps.  Let’s see what they are:

Before Starting to Count

  • Fix a date and time – and inform customers, vendors, etc., so that you can close down for that day. Also, fix a day to deal with the discrepancies if any.
  • Assign roles and responsibilities to employees and review the process so there is no confusion on that day; assign each employee or set of employees to specific categories. Allocate more staff members to the larger categories.
  • No sales or purchases should be done on that day; otherwise, your entire stocktaking will turn up erroneous results
  • Any products sold but not delivered to customers should be set aside and not left on the shelves to be counted
  • Clear an area where you will do the actual counting work to avoid confusion and chaos; organize products by categories, and move them to be grouped together with similar products if necessary.
  • Print out stock sheets to record the counts; your software system should allow you to do that.

During The Count

  • Count everything, even if it’s going to be cumbersome; your stock should also contain work-in-progress, cycle stock, buffer stock, and so on. Don’t engage in guesswork – that could be dangerous.
  • Record what is actually on your shelves, whether in warehouses or stores, and write that number next to the figure as per your software system
  • This is tiring work, so make sure everyone has sufficient breaks. Working continuously can also cause them to make mistakes as fatigue sets in. Planned breaks will help everything go smoothly.
  • For a business with multiple locations or warehouses, you must make sure that you are tracking stock transfers accurately.

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On Completion Of Counting

The inventory stocktake process does not end with counting everything you have.

To get the complete benefit of your work, you need to do the following:

  • Make sure everything is valued correctly, and assess its worth. Check your figures after this, to determine if everything is correct and accounted for. Once you have thoroughly checked everything, you can then update your system.
  • Reorder items that are close to being stocked out, and evaluate your stocktaking results. check for any discrepancies, and note down all of them, no matter how small.

Dealing With Stock Discrepancies

Dealing With Stock Discrepancies

A discrepancy is not good news, as there could be an underlying bigger problem in your inventory management, which might blow up and be disastrous if not resolved.

Also, it would mean your business is operating with false data.

The first thing to do is find out the cause of the discrepancy – it could be as simple as incorrect data entry, wrongly-placed items, or something major like theft or supply problems.

When you know the cause, you can take measures to prevent it from happening again; this may necessitate a change in processes, more security, or better software.

Once you have rectified the issue, just upload the new figure to the system.

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How Can you Improve your Inventory Management?

Inventory is the lifeblood of any business, and you need to ensure you manage it properly.

It’s a good idea to think about how you can improve the stocktaking process first, and a few other steps to make sure you make your inventory management better on the whole.

How Often Should you Take Stock?

This should be a chief consideration when selecting an inventory management system; the answer depends on your business, how complex your inventory is, do you use cycle counting, and several external factors too.

The frequency could be:

  • Periodic – Stocktaking may be performed monthly, quarterly, half-yearly, or even weekly
  • Annual – Suitable for non-perishable inexpensive items; this is a huge task however
  • Continuous – Ideal for larger businesses, and those dealing in perishable items; for example in restaurants and food manufacturing units, daily, weekly or monthly stocktaking is done and stock records are updated continuously.

Here are some things you need to remember that could help you decide how frequently you should do stocktaking:

  • How accurate is your inventory tracking? – more efficient inventory tracking necessitates fewer counts
  • How important is accuracy for you? If you deal in perishable products, your stocktaking has to be more frequent.
  • How much disruption can your business handle? If you cannot afford disruption, regular stocktaking may be a better option.

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Improving your Stocktaking

We have seen that there are different types of stocktaking processes, and there is no one-size-fits-all method.

But here are some tips that may help you improve your stocktaking process.

1. Barcode Scanners

Barcode Scanners

Manual counting can cause errors, especially in larger companies.

With barcode scanning, you can decrease these risks, as they can swiftly and accurately record and store the stock levels simultaneously.

It uses a light sensor, lens, and light source to scan and view vast amounts of data in a single place.

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2. Eliminate Distractions

Smartphones are a big distraction – as are sounds from a TV or music system, PA announcements, etc.

It’s best to cut all of these out and focus on the task to ensure speed and efficiency.

3. Organize the Warehouse

A chaotic warehouse can make the going slow, causing more mistakes. Proper labeling and category-wise storage can ease things.

4. Ask for Feedback

Staff who performed the stocktaking should be asked for suggestions in improving the process.

5. Consider Dedicated Software

Manual stocktaking and using excel sheets can cause fatigue and lead to errors.

It would be a wise decision to switch to a dedicated software application that will help you achieve precision in your stocktaking process, and speed up the whole process too.

Robust inventory management software from Tranquil helps you see real-time stocks reducing dependency on stocktaking for information accuracy. In combination with barcode scanners and other tools, you can automate the process end-to-end for greater efficiency. While the system sends you alerts when the stock of a particular item is close to finishing, you can also configure it to send out purchase orders automatically to selected vendors, eliminating the need for you to constantly monitor, place orders, and so on.

Schedule a demo to see how Tranquil ERP and our Inventory Management Module can bring more efficiency into your business. Happy to answer any queries you may have.