In the previous article we looked at the importance of accurate stock levels. Without it, it is difficult to have visibility of your operations or plan your purchase levels into the future. That is why, in theory, having a computerised (https://infraon.io/blog/importance-of-it-inventory-management-software/ )warehouse management system should mean all these problems are a thing of the past. After all computers are designed to calculate instantly existing levels, additions from receivables, minuses from customer deliveries to what is now. But real life is not like that.
Sometimes staff make a mistake counting stock as it comes in, or even while in storage. Deliveries can be lost, or goods are returned from the customer. All of these variables can lead to discrepancies’ in the stock levels and from time to time these need to be adjusted back in line. This is a manual process of counting actually what is there and presents its own challenges(https://www.workspace.co.uk/content-hub/business-insight/stock-control-methods).
How often should it be done? Everyday seems over the top, once a year not enough. Even if you do decide to do it, when? You need to take staff out of their normal duties which is hard when everyone is busy. It is also preferred that stock shouldn’t more whilst in the process of counting. There is not much point in trying to get accurate figures on moving ground. Sometimes that means counting over the weekend, or over the Christmas break. Staff aren’t too keen on giving up on their free time.
If all the staff are in place then how is the stock counted? A piece of paper divide up between different areas. The figures would have to be entered into the system later. Spreadsheets on tablets then imported into the system in bulk, or some platforms have developed mobile phone apps which immediately update stock levels. With programs, such as Cin7 Core(https://it-ebs.co.uk/cin7core/) , a staff member can log in to the app, see the area that has been assigned to them and quickly update quantity levels (https://it-ebs.co.uk/news/stocktake-how-to-guide/ ).
The other element that needs to be considered is the value of each item. In order to update the quantities of stock then a value needs to be applied. This will then give a value (quantity X price) across the product range, to give a monetary amount on the balance sheet. That may sound straightforward but how do you determine the price. If it is from one supplier, and their price doesn’t vary all that much, then just use what is in their catalogue, but what happens if you buy from multiple suppliers? They will all have different prices, volume discounts and what about exchange rates? These varied dramatically during the pandemic and can massively affect your final figures. There are a multitude of variables to contend with and you could either accept a rule of thumb, or if possible, grab an export of the purchase ledger, organised by SKU and calculate the average across a time period (say the last year). For amounts in foreign currency you would have to backward calculate that amount to the home currency. Most systems should have the rate applied to each transaction, but it not, you can get the rate applied from a reliable source such as the Bank of England website.
Thus completing the stock will both update levels for logistical planning, and your balance sheet to accurately portray your companies’ worth.