Taking stock - Should we be doing monthly stocktaking in our business?

How often do you take stock of your inventory—literally? While stocktakes might seem like a time-consuming and costly exercise, they’re an essential investment for long-term business success. Regular stock takes don’t just streamline your operations; they empower you to make smarter, data-driven decisions that can boost financial performance over time. In this blog, we’ll explore why consistent stock management is the backbone of a thriving business and how it can transform your operations.

Recalibrate records and ensure accuracy

In today’s fast-paced business environment, it is essential for businesses to have a deep understanding of their inventory and associated costs. Pricing plays a critical role in influencing the end consumer, especially with inflation, levies, and other landed costs driving up product prices. Without accurate costings and inventory records, businesses may struggle to recalibrate prices swiftly and efficiently.

Over the past few years, we’ve observed monthly price increases for many clients, yet it often takes months for businesses to adjust their pricing and pass these costs on to customers, risking their profit margins. Conversely, failing to lower prices when input costs decrease can result in overpricing, leaving businesses vulnerable to losing customers to competitors.

By conducting regular stocktakes, businesses can better track inventory costs, make timely adjustments, and maintain competitive pricing strategies that protect their bottom line.

Demand management

To meet customer needs effectively, businesses must ensure they never run out of staple stock and have sufficient inventory to meet demand. Regular reviews of stock levels and sales trends allow businesses to prepare for peak seasons and fluctuations in consumer behaviour.

For example, a seasonal retail business should stock up on summer items well in advance to avoid disappointing customers. If the right inventory isn’t available when needed, customers may turn to competitors who have what they’re looking for.

Understanding stock demand more intimately through routine stocktakes also enables businesses to identify fast-moving items. This knowledge can be leveraged to develop targeted marketing and purchasing strategies that improve financial outcomes and customer satisfaction.

Preventing overstocking and understocking

Closely tied to demand management is the need to strike a balance between overstocking and understocking. Both scenarios can negatively impact financial performance. Overstocking ties up working capital, increases storage and transport costs, and heightens the risk of stock obsolescence. On the other hand, understocking can result in missed sales opportunities and dissatisfied customers.

Regular stocktakes help businesses monitor inventory levels and avoid these costly extremes. By optimising stock levels, businesses can reduce waste, improve cash flow, and better align with customer expectations.

Managing stock obsolescence and theft

Overstocking also increases the risk of stock obsolescence. Excess inventory often leads to clearance sales, eroding profit margins and conditioning customers to wait for discounts. Proactively managing slow-moving stock through data insights can prevent such scenarios. For instance, restaurants use daily specials to sell items nearing their expiration date.

Additionally, regular stocktakes can help deter theft by identifying discrepancies in inventory more frequently. Many businesses are now incorporating tools such as warehouse cameras and improving safety protocols to further mitigate theft risks. These practices not only protect inventory but also foster safer work environments.

Hedging in trade and Foreign Exchange (FX) movement

For businesses involved in international trade, managing currency exposure is crucial to maintaining financial stability. Hedging against trade and FX fluctuations helps businesses safeguard their margins in volatile market conditions.

Proactive management of imports and exports through regular stocktakes supports better forecasting and decision-making. Discussing FX strategies with your bank and negotiating terms with suppliers and customers can unlock hidden potential and improve overall financial performance.

Preparing for business sale

A lack of regular stocktakes can raise red flags when selling a business. Potential buyers scrutinise inventory accuracy and processes to assess working capital, seasonality trends, and overall reliability. Without detailed, up-to-date stock records, the credibility of your business’s financial health may come into question, often leading to lower valuation offers.

Regular stocktakes provide clarity and confidence in your inventory data, making your business more appealing to prospective buyers and ensuring a smoother transition during the sale process.

Conducting monthly stocktakes is more than just a routine task, it’s a strategic investment in your business’s financial health, operational efficiency, and long-term growth. From recalibrating costs and managing demand to preventing inventory issues and preparing for the future, regular stocktakes empower businesses to stay competitive and thrive in today’s dynamic market.

For assistance transforming the way you manage inventory, make decisions, and achieve your financial goals speak to your usual Forvis Mazars advisor or one of our business advisory specialists below:

Brisbane – Matthew BeasleyMelbourne – Christopher CicuttoSydney – Dean Newman
+61 7 3218 3900+61 3 9252 0800+61 2 9922 1166

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Forvis Mazars Group (Forvis Mazars Group SC) is an independent member of Forvis Mazars Global, a leading professional services network. Forvis Mazars Group SC is a cooperative company based in Belgium and organised as one integrated partnership, operating in over 100 countries and territories. Forvis Mazars Group SC does not provide any services to clients.

Author: Christopher Cicutto

Published: 30/1/2025

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