Planning for stocktaking


This issue of how to plan, conduct and conclude a stocktaking process is a follow-up to my previous article that highlighted the importance of stocktaking.

For the activity to be credible and independent, a manager, normally the management accountant, is appointed to oversee the process.

A programme drawn up by the storekeeper needs stakeholders to concur. Theoretically, during stocktaking, warehouses are closed but practically, it is not possible due to unforeseen circumstances even in the presence of good planning and sufficient notice to all stakeholders.

Stock movements must be minimised and properly recorded so that counts are appropriately adjusted at the conclusion of the stocktaking.

The critical pre-stocktaking activities are normally overlooked. Administrative checks are done to ensure all inventory records are up to date and correct.

These checks could be a census of all inventory vouchers or random document verification depending on the level of activity or the stock values involved.

Inventories need to be arranged neatly, ensuring same items are in the same place and if in more than one location, a notice is available to lead verifiers to the other location.

Any items held in the warehouse that are not part of your assets ought to be labelled in advance. A record of goods-in-transit must be compiled and agreed upon by creditors.

All items on loan internally or externally need to be returned to stores or if not possible, written confirmation must be received. Lastly, stocktaking sheets need to be prepared manually or electronically.

The stock sheets must be numbered and have stock codes, full material description, usual stock location and the unit of measure (UOM). Stock sheets must be prepared for all items in the warehouse preferably in the order of physical location.

During the stocktaking process, stock vouchers needs to be controlled.

The record of the last voucher before the physical count must be recorded so that any unavoidable stock movement can be appropriately adjusted. Manual stock cards are ruled off to signal that all stock vouchers were recorded.

Stocktaking teams must record their names, date of stocktaking and sign-off stocktaking sheets to authenticate the process and allow for follow-up in the event of anomalies.

It implies that teams need to be permanent during the stocktaking process.

Teams must record their counts using the stated UOM that concurs with the stock records. The team must record the method used to ascertain the stocks, ie counted, weighed, measured or estimated.

After completing a stock sheet, the person in charge of the stocktaking would then assign an independent person to enter ledger balances on the stock sheets comparing them with physical count.

In the event of stock discrepancies, a new stock sheet is opened to allow a verification count that is normally done by a new team. If the second count confirms the first count, a discrepancy is confirmed.

If the second count matches the ledger balance, that physical count is accepted as correct. If the two conditions above have not been achieved, a third count is conducted to establish a correct count until at least two counts confirm one quantity.

The physical count verifies stock balances held by the organisation. It is important to ensure that any discrepancy picked on sample counts conducted by auditors after sampling, are communicated to them so that they can verify their count and authenticate the stock taking process.

Discrepancies of inventory uncovered during the stocktaking process will need to be investigated.

Nyasha Chizu is a Fellow of CIPS and the chairman of CIPS Zimbabwe branch and writes in his own capacity. For feedback contact