Inventory management and stock take are often seen as tedious and frustrating tasks. That may be, but it is also one of the most important aspects of owning a business.
Inventory management refers to a recordkeeping system that tracks whether you have the right inventory, at the right time, and in the right place. All industries, from wholesale to retail, make use of some form of inventory management system.
The Two Approaches to Inventory Management
Inventory can be managed via a perpetual or periodical approach.
A perpetual inventory system constantly updates a business’s inventory account. This is done by consistently documenting when stock has been produced, bought, sold, or has been returned by a customer. These calculations are made on a unit-by-unit basis.
A periodical inventory system heavily relies on stock take. It does this by updating a business’s inventory account at regular intervals, via the method of stock take. These stock takes or “physical inventory counts” take place at the end of an accounting period. An accounting period can vary anywhere from monthly to yearly, depending on the chosen method.
How Do You Prepare for Stock Taking?
Planning for a traditional stock take before it occurs is extremely important, as it can turn into a confused mess with inaccuracies if done on a whim. There are some actions you can take to ensure you are properly prepared for stock taking.
- Book a time: it is important to book a specific time in which your stock take will occur. Consider booking this time outside of business hours; alternatively, choose a time where you know business will be slow.
- Choose your staff: you can either hire outsiders to execute a stock take or use your own staff. Using your own staff can be beneficial, as it gives them a more in-depth understanding of inventory management.
- Make use of supervisors: if you are using your own staff, ensure that there are supervisors present to ensure that the stock take is done correctly. The last thing you want is for inaccuracies to creep in, as this can throw off your entire business model going forward.
- Gather the right supplies: it is essential to have the right supplies ready before stock take begins. Some supplies include stock sheets, pens, calculators, and handheld scanners.
How Can Stock Accuracy Be Improved?
The answer to increasing stock take accuracy is Radio Frequency Identification (RFID). RFID makes use of unique smart tags that are attached to stock items. The smart tags are linked to a database that holds all stock information. Each tag has a unique ID that can only be read once, thus, no duplicates will be recorded. With this technology, thousands of tags can be read in minutes. Some more benefits linked to RFID include:
- 75%-90% decrease in time spent on stock take.
- 97%-99% accuracy in inventory counts.
- 24/7 stock monitoring to improve working capital management.