Stocktaking and warehouse stock: a practical guide

Stocktaking is a tool that verifies whether the accounts match reality. It is especially important for warehouse stock, because this is where differences between the records and reality arise most often.

What stocktaking is for

The purpose of stocktaking your warehouse stock is to compare the actual state of the assets with the state recorded in the accounts. This lets you uncover shortages, surpluses, damaged goods and errors in the records that would otherwise distort the financial result.

At the same time, stocktaking is not just a formality before the financial statements. It is an opportunity to clear the warehouse of unsaleable stock and get a realistic overview of what the company actually owns.

Types of stocktaking

We distinguish between physical stocktaking, in which the assets are actually counted, weighed or measured, and documentary stocktaking, which is used for items with no physical substance, such as receivables or payables. Stock held in a warehouse is usually verified physically.

How to proceed step by step

• set the stocktaking date and the persons responsible
• make sure there are no movements of goods during the count
• draw up inventory count sheets item by item
• compare the actual quantities with the book quantities
• quantify and post the stocktaking differences

Thorough preparation is half the battle. If goods continue to be issued and received without being recorded during the count, the result will be distorted and the entire stocktake will have to be repeated.

Dealing with differences

A shortage means that the actual quantity is lower than the book quantity; a surplus is the opposite. Every difference must be documented and its cause assessed.

Part of the difference may be natural loss within the norm, such as evaporation or spillage, while another part may lead to a claim for damages against the person responsible. That is exactly why it is important not only to post the difference but also to explain it.

Valuing stock

Stock is valued using the chosen method, which the company applies consistently throughout the whole period. Careful valuation affects both the level of costs and the value of the assets in the balance sheet, so it is worth paying attention to. Set out the specific procedures in an internal policy.

Tips for a flawless stocktake

Keeping continuous records during the year makes the year-end count much easier. Clearly labelled storage locations, orderly shelving and regular ongoing checks all help.

• a logical layout and labelling of the warehouse
• regular checks throughout the year
• a digital warehouse system to prevent transcription errors and duplicates

Stocktaking documentation

The result of the stocktaking must be recorded in a stocktaking report, which summarises the quantities found, the differences and how they were settled. This document is important in an inspection because it proves that the company actually carried out the stocktaking.

The documentation also includes the inventory count sheets signed by the persons responsible. Honest records protect both the company and its employees, as they clearly determine who was responsible for which stock.

Unsaleable and damaged stock

Stocktaking often reveals goods that are damaged, obsolete or have been unsaleable for a long time. Such stock should not remain in the records at its original value, as it would distort the company’s assets.

In such cases, you consider reducing its value by means of a valuation allowance or writing it off completely. Check the specific procedure and its tax treatment for the period in question.

Stocktaking as a management tool

Stocktaking should not be just an obligation before the financial statements, but also a source of useful information. A regular overview of your stock will show you which goods move quickly and which tie up money unnecessarily.

Based on these findings, you can plan orders better, reduce unnecessary stock and free up cash. Well-managed stocktaking and warehouse stock thus contribute directly to the company’s healthier finances.

Related articles: Financial statements of an s.r.o.: what they contain and when to file them, Closing the accounting year: a complete checklist for entrepreneurs, Accounting documents: what they must contain and how long to archive them.

Frequently asked questions

How often does stock need to be counted?

Stocktaking is carried out at least as at the date for which the financial statements are prepared, which usually means once a year. Companies with a high turnover of goods, however, carry out interim stocktakes more often to keep their stock levels under control.

How is a stock shortage posted?

The shortage is first documented and its cause assessed. Natural loss up to the set norm is posted to expenses, while a shortage above the norm may be charged to the person responsible as a claim for compensation. The exact posting depends on the specific situation.