A stockout occurs when a product or item is out-of-stock. Stockouts can occur because not enough inventory was ordered to supply for the demand of the product.

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inventory management

Stocktake Preparation Checklist: How to Conduct a Successful Stocktake to Prevent Stockouts and Dead Stock

By QuickBooks Australia

Published on August 15, 20243 min read

According to the Australian Taxation Office, businesses can claim a tax deduction on the majority of expenses incurred when buying, maintaining, repairing, and selling business assets or stock. To maximise your tax refund, it’s important to keep appropriate records. As part of this process, if your business buys or sells goods or inventory, you’ll most likely need to conduct a thorough stocktake at the end of each financial year.

In this article, we take a deep dive into what a stocktake is and provide a stocktake preparation checklist to ensure you know how to conduct a successful stocktake to prevent stockouts and avoid deadstock.

Our stocktake preparation checklist is designed to facilitate an efficient stocktake process in 8 steps. Read through our stocktake preparation checklist or jump ahead to the relevant section by clicking on the links below:

Define your stocktaking methods
Set a time and date for your stocktake
Have the right tools ready
Prepare your stockroom
Categorise your stock
Count each inventory item
Validate your stock
Keep clear and accurate inventory records

Before you learn how to do stocktaking, let’s look at what a stocktake is.

What is stocktake?

Stocktaking is the process of physically counting and recording all the stock items or inventory that a business has on hand at a specific point in time. Stocktaking is also known as inventory counting. The purpose of conducting a stocktake is to verify the accuracy of your inventory records and to identify any discrepancies between actual stock levels on hand and stock recorded in your inventory.

Types of stocktake

There are five types of stocktaking methods based on how often you conduct a stocktake:

Annual stocktaking: occurs once a year where all stock is counted in sitting, usually at the turn of the financial year to ensure accounts are accurate for tax time.
Periodic stocktaking: occurs monthly, quarterly or twice a year to account for certain accounting periods. Businesses with high inventory turnover may benefit from periodic stocktaking.
Continuous stocktaking: occurs numerous times throughout the year and may involve different products being counted at different times. Businesses with a large volume of different products may benefit from continuous stocktaking to minimise the impact of once large stocktake.
Spot checks: occur randomly and often as the result of discrepancies which may be linked to incorrect inventory records, theft or spoilage.
Stockout validation: occurs when products are out of stock or stock levels are very low. This method helps to record why and when a stockout occurred and may help with calculating an appropriate reorder point.

Why is stocktaking important?

Stocktaking is an important process because it ensures businesses of all sizes and industries have an accurate understanding of their inventory position. A stocktake can uncover valuable insights into sales trends, product performance, and customer demand. These insights allow businesses to make informed decisions about stock reorder points to ensure optimal order quantities and inventory levels, pricing strategies, marketing campaigns and sales forecasts.

Stocktake preparation checklist

The more stock you have, the more laborious a stocktake can be. The following stocktake preparation checklist will ensure your stocktake is completed as smoothly and accurately as possible.

1. Define your stocktaking methods

2. Set a time and date for your stocktake

3. Have the right tools ready

Stock sheets
Clip boards
Calculators
Pens
Labels to organise your stock
Scales (if counting stock by weight)
Scanners for barcoded items
Mobile devices
QuickBooks inventory management software

4. Prepare your stockroom

Create designated sections where certain stock should be stored
Clearly label shelves to identify stock
Use colour-coded labels or stickers to categorise stock
Pre-count items into lots of 10, 50 or 100

5. Categorise your stock

Product types
Sizes
Colours
SKUs

6. Count each inventory item

7. Validate your stock

8. Keep clear and accurate inventory records

1. Define your stocktaking methods

Decide on the specifics of your stocktaking process and make sure to share these details with staff members who will be assisting with the stocktake to ensure a smooth process. Here are some questions to answer when defining your stocktaking methods:

How many staff will we need?
Who will do the counting?
Who will do the recording?
Where will you record the stock levels?
What tools will you use?
How will you organise your stock?
Which category of stock will you start with?
Will you begin at the top of the shelf and work downwards? Will you go from left to right?

2. Set a time and date for your stocktake

Setting a time and date for your stocktake is crucial for minimising the impact a stocktake can have on your business and sales. It is best to conduct a stocktake during a slow sales cycle or outside of business hours to reduce the level of interruption a stocktake may cause to your business. It’s important to consider how long the stocktake will take and how many staff members will be needed when setting a time and date for your stocktake.

3. Have the right tools ready

Before beginning your stocktake, make sure you have all the tools you need to make the stocktake as smooth and accurate as possible. You should already be keeping detailed records of your inventory on what are known as stock sheets. Stock sheets should contain all the relevant information for identifying and counting stock items including:

Product names
Descriptions of your items
Serial numbers
Universal product codes (UPCs) and/or stock-keeping units (SKUs)
Colours
Sizes
Quantities

These identifiers are often combined into an abbreviated stock keeping unit (SKU).

Here is a checklist of some tools to keep handy during your stocktake:

Stock sheets
Clipboards
Calculators
Pens
Labels to organise your stock
Scales (if counting stock by weight)
Scanners for barcoded items
Mobile devices to access digital stock sheets if you use cloud-based inventory management software like QuickBooks

4. Prepare your stockroom

Conducting a stocktake consumes a large chunk of time, especially if your stockroom is unorganised and items are not easily accessible. Preparing and organising your stockroom in advance will ensure your stockroom is clean and organised, and your stock items are readily accessible.

Here are some additional tips for organising your stockroom to make it easier to find and count stock and minimise the likelihood of miscounting:

Create designated sections where certain stock should be stored
Clearly label shelves to identify stock
Use colour-coded labels or stickers to categorise stock
Pre-count items into lots of 10, 50 or 100

5. Categorise your stock

Now that your stockroom is clean, it is also beneficial to categorise your stock into easily identifiable categories to make it easier to count, scan, move through your inventory seamlessly and avoid double handling and counting items twice. Below are some examples of how you can categorise your stock for the purpose of stocktake:

Product types (pants, shoes, accessories)
Sizes (small, medium, large)
Colours (red, blue, green)
SKUs

Make sure you distinguish between your different inventory. Separate any items purchased by customers that may be still in your warehouse awaiting order fulfilment and shipping. Determine exactly what needs to be counted and what doesn’t.

6. Count each inventory item

This is not the time for estimations and, to guarantee precision, you must count everything. It’s not safe to assume that current inventory data is correct. You can count stock items physically or with a barcode scanner. An accurate stocktake will help to avoid over-stocking and identify damaged stock and deadstock. It will also alert you to potential theft and allow you to make smart decisions regarding your ordering processes and warehouse procedures.

Be sure to check stockrooms and other storage areas, including the tops of shelves, underneath shelves, or anywhere else items may have been forgotten or misplaced.

7. Validate your stock

Once your stock is counted, record your physical counts on your stock sheets or your online inventory management software such as QuickBooks which will automatically update stock levels going forward as stock is sold and repurchased. Check your stocktake counts against your current inventory records. Ensure all items are accounted for and make a note of any discrepancies.

8. Keep clear and accurate inventory records

Once your stocktake has been completed, update your inventory records with the results and make sure to keep clear and accurate records going forward. QuickBooks Online can make this process easier day-to-day by automatically syncing sales, orders and inventory levels from your e-commerce platforms to QuickBooks so that you’ll always have a real-time view of your stock and your business performance.

Join a free 30-day trial to see how QuickBooks inventory management can help you keep clear and accurate inventory records.

Frequently Asked Questions

What is deadstock and how to avoid it?

Deadstock is excess inventory that is no longer moving through the business or is discontinued or no longer produced. Deadstock is often the result of miscalculations and overordering. A business can avoid deadstock by conducting a well-planned stocktake, using inventory management software like QuickBooks to keep track of inventory and identifying optimal order quantities by calculating inventory turnover and reorder points.

What is a stockout?

How can you prevent a stockout?

What tools can help with stocktake?

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Stocktake Preparation Checklist: How to Conduct a Successful Stocktake to Prevent Stockouts and Dead Stock

What is stocktake?

Types of stocktake

Why is stocktaking important?

Stocktake preparation checklist

1. Define your stocktaking methods

2. Set a time and date for your stocktake

3. Have the right tools ready

4. Prepare your stockroom

5. Categorise your stock

6. Count each inventory item

7. Validate your stock

8. Keep clear and accurate inventory records

Frequently Asked Questions

What is deadstock and how to avoid it?

What is a stockout?

How can you prevent a stockout?

What tools can help with stocktake?

Related Articles

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