Stocktake

Stocktake, also known as stock counting or physical inventory, is the process of physically counting and verifying the quantities of stock held in a business’s inventory to confirm accuracy against recorded levels. The primary aim is to ensure that inventory records reflect actual stock on hand, support reliable financial reporting, identify shrinkage or losses, and provide data for procurement, production planning, and sales.

The stocktake process typically involves planning and selecting items to count (often using ABC analysis), scheduling counting rounds, and organizing counting teams. Counting can be a full physical count of all items, a cycle count of a subset on a rotating schedule, or random sampling. After counting, results are compared with the inventory system, discrepancies are investigated, and causes are identified. The records are then adjusted, and any valuation changes are recorded. Counting aids such as barcode scanners or RFID devices, and software in ERP or inventory management systems, improve speed and accuracy.

Types of stocktakes include annual (periodic) stocktakes, cycle counting (continuous counting of selected items), and rolling counts. Inventory valuation for financial reporting may be affected, influencing cost of goods sold and the asset value on the balance sheet. Common challenges include operational disruption, counting errors, misplacements, and shrinkage; best practices stress clear procedures, security controls, appropriate labeling, and timely recounts when discrepancies are found.

Stocktakes are governed by accounting principles that require inventory to be measured at cost or net realizable value, depending on jurisdiction and applicable standards, with adjustments reflected in financial statements.