The Australian Taxation Office requires businesses that buy and sell stock do a stocktake to value it at the end of each income year provided the business turnover is $10 million or more, or is less than $10 million and the difference between the stock level at the beginning and end of the year is more than $5,000.
Not so long ago, to meet EOFY obligations, retail and wholesale businesses would close the doors for at least one day and employees would get busy counting. If every small retail and wholesale operation in Australia still processed the EOFY stocktake this way, a total of 714,000 people would stop normal activity and spend (at least) a day counting inventory. That equates to 5,712,000 man-hours (or 142,000 working weeks) of paid labour that delivers no benefit beyond an “accurate” stock count, without taking lost trade into account. And those numbers are only for small businesses in the retail and wholesale trade sectors.
Traditionally as the only activity that gave business owners a true understanding of inventory holdings, elements of the stocktake process are weirdly archaic. So too is the idea that an accurate count was only needed once a year. “Accurate” is probably a misnomer as well, because with that much human involvement, who’s to say the numbers were ever right? Physical counting is prone to error, as is documenting the count, as is data entry. Running reports didn’t necessarily signal the end of it either, as notable variances often triggered a whole or partial recount.
The base reason for stocktaking is to reconcile physical stock to your inventory records, to highlight variances and identify issues with stock management and control. It also gives business owners an accurate view on stock movements and stock on hand, which enables informed decision-making regarding slow-moving items, damaged stock, technology obsolescence, warehouse processes and theft. Why would this matter only once a year?
Today things have changed, and the availability of cloud-based inventory management solutions means the stress of stocktake season disappears. Integrated, real-time stock management means you can meet your obligations, without the need to halt trading.
Not just once a year
A better way to keep on top of inventory is to carry out multiple stocktakes throughout the year. It doesn’t need to be painful, nor does it disrupt business and halt sales. You can carry out partial stocktakes, divided up by location, brand or product type at any time, giving you a year-round view.
Multiple sales channels
If you’ve leapt on board the omni-channel train, inventory in your eCommerce store needs to be synched with marketplace listings, like eBay and Amazon, as well as your physical shopfront. Integrating and automating inventory management is critical for a successful stocktake process.
There’s plenty of retail platforms that will plug in to inventory management software, but they’re often prone to real-time tracking errors and have difficulty moving stock across multiple locations. A better option is a truly integrated offering, managing orders, fulfilment and shipping across multiple warehouses, locations and sales channels
Your accountant needs to see three things post-stocktake:
- summary of sales
- summary of returns, refunds and credits
- stock valuation.
A good inventory management system will make generating these reports a seamless and easy.
The end of the financial year comes with enough stress, so it makes sense to utilise available options so you can get on with the business of selling.
Ryan Murtagh, CEO, Neto