Planning and carrying out stocktaking efficiently
As soon as the summer holidays are over, Christmas decorations start appearing in many supermarkets. Rarely are you already in the mood for gingerbread and chocolate Santas at this point. And yet every time, it amazes us how quickly the end of the year is suddenly approaching. What seems to be the premature appearance of Christmas decorations might actually be a perfect example of excellent planning.
How well is your company prepared for the challenges it faces every year? Recurring tasks at the end of the year, such as stocktaking, should not take most companies by surprise. And yet the period leading up to the year in particular is characterised by time pressure and stress at many businesses instead. Why don’t you prepare yourself for the regular annual stocktake well in advance this year?
This feature tells you everything you need to know for efficient planning and trouble-free performance of your stocktake. First, we are answering some frequently asked questions about inventory checks.
Why do a stocktake?
Why does it advisable to carry out a stock check?
Carrying out a regular stocktake at your company helps you to determine the current “actual stock” situation. The stocktake covers all tangible goods (physical inventory), intangible circulating assets and liabilities (book inventory) and moving fixed assets, i.e. vehicles, machinery and business equipment (inventory).
At least once a year, on a fixed day, you carry out a stocktake to ensure that the continuous recording of receipts and issues in your inventory management system as well as the bookkeeping in your company is carried out correctly.
To summarise, regular stocktaking at your company:
- Forms the basis for the annual financial statement
- Identifies potential losses due to theft or wastage
- Corrects any errors in the bookkeeping and the inventory management system
- Provides an overview of which goods (in terms of value and quantity) are currently in stock in your warehouse or office
The annual stocktake not only provides a statement for the tax office. Stocktaking is also a useful tool for your company to review in-house bookkeeping and to compare the target and actual inventory.
Am I obliged to carry out stocktaking at my business?
Office of the Revenue Commissioners specifies a stocktake for your company if your business is subject to annual accounting records. However, even smaller companies that are not required to prepare financial statements, a voluntary stocktaking process to check the real financial situation makes sense.
Expert tip: don’t just focus your stocktaking activities on the goods in your warehouse. C-goods, these being articles which are not directly involved in the value creation chain in your company, should be listed as well. This refers, for example, to office supplies or cleaning equipment.
Is it mandatory for the stocktake to be carried out on the last day of the year?
In principle, a stocktake is required at different points in time: on specific occasions, for example when a company is founded and when personnel changes occur in management, and on a regular date at the end of each financial year.
For most companies, the financial year coincides with the calendar year, which is why the reporting date for the annual stocktake is specified on your annual tax return. It is often impossible to carry out the complete stocktake in one day. The different types of stocktaking activities therefore allow you to carry out the stocktake before or after the annual reporting date (see stocktake types).
There are different types of stocktakes that you can carry out. However, make sure you find out which type of stocktaking activity is suitable for your company. For deferred stocktake types, you should ensure that your inventory management system is kept accurate. A continuous stocktake must not be used to account for perishable goods.
Annual stocktake is the most common type of stocktake. The complete stocktake is carried out on the balance sheet key date itself.
A deferred stocktake carried out a maximum of ten days before or after the balance sheet key date is permissible. In this case, any changes to the quantity and value of stock within these days must be backdated or updated to the actual stock on the balance sheet key date by means of receipts.
Please note: This is not a sample stocktake, which involves accounting for inventory by means of representative samples. Permission to carry out this type of stocktaking activity must be officially applied for at the tax office, and is only approved for very large companies that meet certain prerequisites.
Continuous stocktaking involves recording inventory for different merchandise categories on different days throughout the year. Once a year, on a fixed balance sheet key date, a physical stocktake of all material groups is carried out to compare the target stock with the actual stock. To save resources and time, you can choose a day when stock levels in the warehouse are low.
This is a deferred type of stocktake. In the case of a deferred stocktake, the stocktake can be carried out either three months before or two months after the actual balance sheet key date. However, the actual stocktake on the actual balance sheet key date remains decisive. This must be updated or backdated based on value.
The deferred stocktake makes greater flexibility possible. However, it also contains some pitfalls, since any changes to inventory must be documented exactly for the correct updating or backdating over the months.
Please note: permission to carry out this type of inventory must be applied for in advance at the tax office.
This is how to succeed at planning and carrying out the stocktake
You will find some practical tips for optimal planning and carrying out your next stocktake below:
1. Choose the right time
The day for the stocktake in your offices is best scheduled for a period when there is little urgent business in the company.
The same applies to the inventory in the warehouse. Please also note: a good time for physical stocktake is when your stock is low.
The deferred types of stocktake give you some flexibility at first. However, do not forget to plan additional time to reconstruct the stocktake on the annual reporting date. The more days there are between the day on which they were recorded and the annual reporting date, the more work you will have to do.
2. Allow enough time
Depending on the size of your business, stocktaking activities may take a few hours, a day, or even several days. In case of doubt, try to plan a little more time to avoid careless mistakes when working under time pressure.
Many companies even carry out the stocktake outside regular working hours in order to be able to concentrate fully on stocktaking activities.
3. Assign your employees optimally
Weigh up whether you can carry out the stocktake with your own employees or whether it might make sense to appoint stocktake assistants instead.
Even if additional help is another expense, in many cases it is still worth paying for. Experienced stocktake assistants usually complete the stocktake quickly and reliably, while your own employees are able to get on with their own work.
Outsiders also have an unbiased view of the situation in your company, which makes it easier for them to spot discrepancies. If you are having your own employees carry out stocktake, then assign them to a different department, and not to their everyday work environment.
During stocktaking, employees should ideally work in teams of two. One employee writes and the other takes notes. This allows you to minimise errors, and stocktaking proceeds faster.
4. Define rules for carrying out stocktaking
If you decide to hire stocktake personnel, the temporary staff will usually know all about the standard procedure. You should always remind your own employees of the rules before carrying out your stocktake.
It is advisable to proceed from left to right and from top to bottom when entering articles. Once a team has completed an area, it should be marked accordingly to avoid duplication. The stock lists should be completed legibly and in block letters. If necessary, define guidelines for writing numbers to avoid confusion later.
The optimal work flow when carrying out stocktakes
There’s still plenty of time left until the annual reporting date? You should not, however, underestimate the benefits of good preparation. The following checklist will help you plan your next stocktake to ensure it is an efficient process.
1. A few months before stocktaking
- Set a date for your stocktake
- Determine the time required for the stocktake
- Organise stocktake assistants, if applicable
2. Some days before the inventory check
- Communicate rules on how to carry out the stocktake, and a schedule, to employees and send it to them in writing
- Room preparation: tidying up and cleaning to facilitate work
- Divide the company into stocktake areas with the same scope of work and colour code them
- Determine an stocktake manager and organise a central contact point (coordination of the work flow, queries, submission of inventory lists)
- Divide employees into teams of two
- Assign one or more areas of responsibility to each team
- Provide sufficient working material: notepads, writing materials, etc.
3. On the day of the stocktake
- Provide personnel with instructions
- Ensure proper stocktaking by employees
- Verify all submitted inventory lists (legibility, filled out with ballpoint pen, endorsed with the date and signature of the respective employee)
- Tour and check of all inventory areas
4. After the stocktake
- Repost any differences in inventory to the right accounts
- Submit documents to the Office of the Revenue Commissioners
Any other questions?
Following this workflow will ensure that there’s nothing between you and an optimally organised stocktake this year. If you have any other questions, please do not hesitate to contact us, free of charge.