As the end of the year approaches, many companies are busy preparing for and conducting stocktakes. It often feels like a tedious accounting duty that disrupts normal business operations for a few hours or even days.
In reality, stocktaking is far more than an accounting chore. When done thoughtfully, it becomes an effective tool for control, accuracy, and fraud prevention — and can be managed far more efficiently.
Why stocktaking matters
Stocktaking requirements are defined in the Accounting Act and in the Public Sector Financial Accounting and Reporting Guidelines. However, most of the practical rules come from internal regulations — such as the company’s accounting policies and warehouse procedures.
Because every organisation is different, it’s essential to document your warehouse management and stocktaking principles clearly in internal instructions.
A well-executed stocktake helps you:
- verify that inventories and other assets actually exist;
- compare the physical stock with accounting records;
- identify and correct surpluses or shortages;
- assess whether storage and usage conditions are appropriate;
- and detect deficiencies or fraud.
Ultimately, the quality of your inventory process depends on both preparation and execution.
Key points to ensure a smooth stocktake
- Pick the right date. The further your count is from the balance sheet date, the higher the risk of discrepancies. Also consider business activity — if goods move constantly, counting becomes more complex.
- Keep the warehouse organised. Goods must be stored securely and properly labelled. A cluttered warehouse increases counting errors and complicates daily operations. Similar items should be kept together, and damaged or expired goods must be documented.
- Avoid movements during counting. Ideally, stock movements should stop during the inventory. If that’s not possible, make sure incoming and outgoing goods are properly tracked. Remember — inter-warehouse transfers matter too.
- Include all locations. The stocktake must cover every warehouse and storage site, including external warehouses and goods stored with third parties.
- Separate others’ goods. Clearly distinguish goods owned by other parties to prevent them from being counted by mistake.
- Know what you’re counting. Counters should be familiar with the products to avoid confusion between similar items. This reduces both counting errors and fraud risk.
- Count systematically. Whenever possible, count “wall to wall”. If that’s not practical, establish a clear sequence for counting.
- Mark what’s done. Clearly label counted items to prevent double counting or omissions.
- Use reliable methods. Whether weighing, measuring, or counting — methods must be consistent and documented. In complex cases, consider involving specialists.
- Handle sealed packages correctly. If it’s impractical to open sealed packaging, document the principle and ensure there’s confidence that the packages are full.
- Choose between manual or scanner counting wisely. Scanners reduce human error but barcode data must still be verified. Manual counting carries higher risks of miscounts or mix-ups.
- Hide accounting balances. Counting sheets should not display accounting balances to reduce manipulation risk.
- Document everything clearly. Record results in a way that prevents later editing. Corrections should be made with strike-throughs or separate adjustment entries.
- Supervise and guide the team. The stocktaking committee should be as independent as possible, but also knowledgeable about the goods. The warehouse manager may assist if needed.
- Keep control over the process. The entire counting procedure must be traceable, and all counting sheets collected at the end.
- Investigate major differences. If results differ significantly or contain too many errors, a re-count may be necessary.
Stocktaking doesn’t end when counting stops
Once counting is complete, differences between accounting records and actual quantities almost always emerge. That means the process isn’t finished — it’s time for analysis. In a well-managed organisation, such differences shouldn’t come as a surprise.
Some level of natural loss is inevitable depending on the business type. Items can get mixed up during handling or lost in production. Arithmetic errors also happen. Many experienced stocktakers have learned the value of small details — like numbering counting sheets beforehand — which help avoid unnecessary rework.
If the results are unrealistic or show large unexplained discrepancies, it may indicate poor warehouse records, a flawed stocktaking process, or even fraud. In such cases, repeating the inventory might be necessary.
Ultimately, your warehouse records should work as a daily control tool — not as a substitute for stocktaking.
