What is a stocktake? The 2021 complete guide

Stocktaking is the process of physically checking stock levels for each of the products and materials you sell to make sure that your data is up to date and accurate.

It’s important to have a fine grasp of your stock management to make sure your business can grow.

Without knowing what you have and what you’re doing with your stock levels, there’s no way you can run your business efficiently enough to nurture growth.

The stocktaking procedure can be a minefield to navigate without the right tools and a well-thought-out strategy.

That’s why we have explored the world of stocktaking, including how to do a stocktake, the benefits, and the best techniques for maintaining healthy inventory levels.

Discover everything you need to know about stocktaking in this guide.

What is stocktaking?

Stocktaking, otherwise known as stock counting or inventory checking, is the act of physically verifying the quantity and condition of your sellable inventory currently held.

Two reasons manufacturers may need to perform a stock take are to provide an audit of existing stock or uncover stock discrepancy information.

However, stock taking is a major contributing factor to your inventory control, especially as a manufacturer, as your business function optimally relies on successfully managing not just stock but different types of inventory.

Now you know what is stocktake, why are they important?

Why are stocktakes important?

It doesn’t take a lot of self-reflection to realize that stocktaking is a necessary step in taking care of your manufacturing business.

After all, your inventory – your raw material, components, and subassemblies – is the make-up of everything you use to make and sell your products.

Without a strong foundation, you may be setting yourself up to fail.

Just imagine that you don’t prioritize your stock management over an extended period. You might well end up:

1. Running out of stock on a product
2. Finding yourself with an overflowing stock room that is tying up your cash
3. Landing with a pile of dead stock that is no longer usable
4. Having a load of unchecked damaged goods on your hand
5. Losing sight of potentially beneficial inventory management practices

And these elements can add up fast to create a monster that gets totally out of control. Imagine that your stock data is so out of sync with reality that you cannot fulfill orders on time without wasting huge resources on overstocking.

But hey, not everything is doom and gloom.

What you should really be keeping your eyes on are the awesome benefits that come with having a solid stocktaking procedure in place.

Benefits of the stocktakes

Once you start accurately managing your stocktakes, the fruits of your upcoming labor will become clearer.

Here are just some of the many benefits you can expect to find:

1. Keep your inventory up to date

The importance of accurate data cannot be understated.

Maintaining correct inventory data is useful for manufacturing your products. It will also help you make sure you have finished goods in stock waiting to be delivered to customers, and you’re not carrying negative inventory.

Without it, your production planning may end up becoming obsolete, and even more sadly, your customers might not end up with their products being delivered on time.

Get it right, though. You can save your business on carrying costs and keep your inventory at optimal efficiency.

2. Uncover stock room issues

There are so many elements that can affect the products and materials which lay in your stockroom. Poor conditions, damp atmosphere, badly handled boxes, and even theft are just to name a few.

Of course, most of these problems are just going to be one-off cases that are simply the reality of business. But there’s no doubt that optimizing maintenance and security measures can assure you don’t lose any more stock than you have to.

We’re talking humidifiers, advanced locks, handling procedures, that kind of thing.

3. Improve your sales strategies

Nothing cleanses the soul like a good spring clean. And that’s basically what a stocktake does, except on an even more regular basis (we’ll get to the frequency later).

The main point here is that by constantly being in touch with your product stock you can make a strong visual connection between your sales figures and what’s happening behind the scenes.

It won’t take long to realize that one of your pet products is actually doing a lot worse than you thought when you see it on the same shelf week after week. The opportunity will then arise for you to adjust your sales and marketing efforts to suit the supply you already have in stock.

What is the difference between stock and inventory?

If you’re reading this article so far, but you’re scratching your head in confusion, that’s a fair response.

It is confusing.

So, to quickly clarify, the difference between stock and inventory comes down to what it is you actually sell to customers:

Stock – These are the items that you sell to customers, mostly finished goods. But, if you sell any of your raw materials, components, or subassemblies, then this is classified as stock too.

Inventory – This encompasses everything else, your raw materials inventory and MRO inventory, but still includes your sellable items too.

So, if you read inventory management, that’s how you handle all these items in your business. But, your stock refers only to the items that you sell to the customers.

Now that’s cleared up, the next chapter should make sense…

Managing inventory to make the most of your stocktake

Traditionally, manufacturers and even retailers used periodic inventory management for stocktaking. This is where you perform stock checks at intervals that could be daily, weekly, or monthly.

However, this needs to be done visually and can be extremely time-consuming, and depending on how many items you have in your warehouses, this task can take up to an entire day.

This disadvantage to periodic inventory management is big enough to drive modern, forward-thinking manufacturers over to perpetual inventory management, but what’s the difference?

Periodic inventory – Updating inventory at fixed time intervals by physically counting stock levels.

Perpetual inventory – The continuous real-time updating of inventory, usually achieved with an inventory management system.

You need to look for stocktaking software that can keep your products and materials in sync with your production and sales.

Katana is a perpetual inventory management solution that weaves your sales, manufacturing, and inventory into one seamless workflow.

Best of all, if you’re still using spreadsheets for inventory management, you can finish your initial stocktake and then upload the spreadsheets directly onto the software.

From then on, you can do future stocktakes directly on the Katana dashboard.

For that initial mass update, it’s a simple two-step process.

Firstly, you download a template from Katana, which already has your products and materials listed.

1. Go to “Settings”
2. Select “Data import” from the left-side menu
3. And download the template from the “Update stock levels and reorder points” section

You can then take this spreadsheet with you as you perform the stocktake.

The spreadsheet will look something like this:

The next step is to upload the spreadsheet back onto Katana and let the software do the rest of the work. You will find that all of your inventory is up to date with the data you entered.

From here on out, no need to touch an Excel spreadsheet again.

You can adjust your stock directly on Katana and let the automation process take over.

How often should stocktake be done?

The reality is that there is no standard for how many times you should be doing stock takes, but the truth boils down to:

The more stocktakes the merrier.

There are obvious limits to this mantra, but the point is that you want to have as many updates to your data as you can to ensure that you’re running at your maximum efficiency.

There are two general approaches:

The first is to do a huge annual stocktake, which could involve shutting down your operations and checking everything in one fell swoop.

The second and frankly more beneficial is to be checking your stock regularly throughout the year. Potentially at weekly or monthly intervals.

It’s going to be of much more use to be keeping your records consistently up to date unless your stock room is so tiny that discrepancies are immeasurably rare.

The exact interval is, of course, depending on the length of your product life cycles, but weekly checks are ideal to aim for.

How do you do a stocktake?

Now, don’t be shocked. Just because you aim for stocktakes regularly doesn’t mean you do everything at once.

In fact, this type of stocktaking, also known as cycle counting, is designed to keep your business running as the process is ongoing.

So, what is stock take process?

Well, it’s going to vary for every business, but you can follow these general steps once you have allocated the days and time for your stocktaking:

Before the count

Pause sales and purchases to avoid incoming and outgoing inventory disrupting your stocktake;

Remove unnecessary distractions by either shutting down operations or performing the stocktake after hours; and

Set aside time to resolve discrepancies and solve issues.

During the count

Stocktake all your sellable inventory, even if it’s classed as safety stock, cycle stock;

Make you and your staff are recording stock levels on the shelf and comparing that to figures in your inventory management system; and

Take breaks, this task is long and arduous, and it’s easy to make mistakes when overworking yourself.

After the count

Value your inventory correctly, double-check that valuation, and once you’re happy, upload everything to your inventory management system;

Replenish stock items that are running low and analyze the results of your stocktake; and

Investigate discrepancies and identify what’s making them occur.

The brilliant thing about getting this right is that it will likely improve the flow of your shop floor because everyone on the team is going to be more aware of what is moving in and out of the stockroom once a stocktake has been completed.