This blog examines the importance of efficient stock control. It’s crucial as it means your business will have the right amount of stock, in the right place, at the right time.
If you hold too much stock, or order too soon, then you are tying up cash and you may be incurring storage costs. Goods could deteriorate, or be subject to theft, damage, or become obsolete.
Hold too little stock and you won’t have enough to fulfil customers’ orders and production will slow or cease. You also won’t be taking advantage of discounts available to businesses able to buy in bulk.
Every business has some stock or inventory to control. Whether that’s:
- Materials used by a carpenter
- Car parts for a motor garage
- Paper, printer ink cartridges, and business cards, for a small office
- Goods or materials used in production
- Or products or goods to be sold or redistributed to other people and companies.
There are many stock control systems available, including accounts software packages. Your choice of system depends on how many different products you need to track and how many you have to store.
A small office’s stationery stock doesn’t need an elaborate system – here you could use a spreadsheet to track stock levels.
However, a company importing and distributing goods around the country, will need to use Purchase Order Processing (POP), Sales Order Processing (SOP), as well as a system to track and reorder stock.
You’ll also need a stock room or warehouse, to hold stock. Good organisation means that finding stock items and packing goods will be easy, efficient and fast. You may need racking or shelving for clearly labelled and coded stock.
If goods are perishable, or have a limited shelf life, it’s important to rotate stock, so older items are picked first. Your most popular lines should be easily accessible, to save time.
Regular stock counts ensure that figures agree with those on your accounting package. A well-organised stock room or warehouse will also make it easier and quicker to carry out an accurate stock count. If your stock count does not agree with your accounting figures then work out why.
Your warehouse or stock room should be tightly managed and lockable. Everything that goes in and out needs to be signed for and a paper trail needs to go back to the accounts department, for staff members to update records.
Here’s an example of the order cycle and its paper trail:
- Customer’s order is received by email
- Sales order is raised on the accounting software in SOP
- Customer’s order is fulfilled from the warehouse, if there’s enough stock
- If not enough stock, a purchase order is raised to supplier in POP
- Goods arrive at the warehouse with a delivery note. Goods are counted and checked into the stock area and put in the correct place
- Delivery note goes to the accounts department for recording on POP, and increasing stock levels
- Stock is allocated to the customer order in SOP. This stops the stock being used for a different order
- Customer delivery note and picking and packing notes are printed and go to the warehouse for the order to be fulfilled
- Warehouse staff member picks and packs the order and signs off the picking and packing notes
- Goods are dispatched to the customer
- Picking and packing notes go to the accounts department to fulfil the order on the accounts software. Stock levels are shown to decrease
- Invoice is raised for sending to the customer.
Larger companies often use bar codes or microchips within their product packaging. This makes counting stocks in and out simple and almost entirely automated.
You’ll need to forecast your company’s re-ordering of stocks based on:
- Your current open sales orders
- Past customer ordering history
- And what stocks you already have on order from suppliers.
If you use an accounting package to help control your stocks you’ll be able to print out reports that tell you how many of each stock item, or product, has been used or sold, over a given period of time. You‘ll also see which items have not moved.
Using all this information you can work out:
- How much of each stock item you should hold, at any given time
- Your minimum stock levels
- How often you should be re-ordering.
You’ll also need to understand your lead-time from suppliers on materials and goods, and also ensure that you system flags up any additional and relevant information.
When sourcing an accounting package to handle your stock control, think about whether you have multiple warehouses. Do you have different prices? And do you trade using foreign currencies?
If you are buying materials or goods in bulk, some suppliers allow you to hold your stock at their warehouses, for a fee, and then call them off as required.
Others also pick and pack goods for you, and send them direct to your customers.
Here you are relying on your suppliers to give good service to your customers, and you lose some control. Always try to have more than one supplier, so that your business success is not dependent upon your current supply chain.
Also don’t rush into coding up your stock items, as this needs some serious consideration. Within your accounting software it’s wise to record as much information about each stock item as possible.
This might include suppliers’:
- Stock codes
- Product weights and measurements
- Type or category
- Sales and costs price.
The more information you include, the more detailed and tailored the reports you can produce.
If you’d like help in organising your warehouse or stock room, coding goods, or setting up details on your accounting package, then please get in touch.