Prepare for stocktake
What is a stocktake?
All businesses must account for the value of their trading stock at the end of each income year (closing stock) and at the start of the next income year (opening stock). Trading stock is anything your business acquires, produces or manufactures, for the purposes of manufacturing, selling or exchanging.
Don’t forget to account for any trading stock you use for private purposes. If you take an item of your business's trading stock for your private use, you need to:
- account for it as if you had sold it
- include the value of the item in your business's assessable income.
You’re required to do a stocktake as close as possible to the end of each income year.
A stocktake involves counting and checking all products, goods or inventory in your business to make sure your records are accurate and correct. A stocktake lets you work out the value of your trading stock at the end of financial year for business or tax purposes.
Simpler trading stock rules for small business
If you're a small business with an aggregated turnover of less than $10 million a year, and you estimate that the value of your trading stock changed by no more than $5,000 in the year, you don't have to:
- conduct a formal stocktake
- account for the changes in your trading stock’s value.
Advantages of a stocktake
As well as meeting your tax obligations, benefits of doing a stocktake can include:
- gaining a better understanding of your stock levels
- making sure you don’t have too much or too little inventory on hand
- identifying what inventory you need to buy
- improving your cash flow by identifying and reducing slow moving stock
- detecting theft and gaps in your stock levels
- reviewing your pricing strategy.
Costs of a stocktake
As well as the benefits, doing a stocktake can come with costs, including:
- accidental damage since people are physically handling your stock
- extra employees costs that you hire to help with the stocktake
- possible lost income due to taking time to check inventory rather than selling goods and services.
Conducting a stocktake
Follow these steps to prepare for and conduct a stocktake for your business.
It can be hard to keep track of your inventory when doing a stocktake. It’s a good idea to plan a stocktake before you start. For example, make sure you have stocktake sheets ready to fill in and ensure your employees know what stock to count.
Doing your stocktake during business hours may interfere with your day-to-day business running and annoy your customers. Depending on your business and customers, consider if you should do your stocktake outside business hours.
Doing a stocktake can be complicated. Consider having a dedicated supervisor at each stocktake location to coordinate your workers and keep things running smoothly.
A stocktake can be costly and time consuming, so only do one when you need to. Stocktakes can help you to identify what stock you need to order or retire, help you keep track of your inventory and detect theft.
Make sure your employees know what to do during the stocktake and provide them with essential tools to complete the stocktake successfully. This may include things like stocktake sheets and pens to help them keep track of what has been counted.
If you’re conducting your stocktake during business hours, consider giving casual employees extra hours to do the stocktake. This can let your other employees continue to serve customers while the stocktake is happening.
The costs of doing a stocktake are higher when your business has a lot of stock. A stocktake sale can help you lower your stock levels before you conduct a stocktake.
Other benefits of doing a stocktake sale can include:
- higher sales
- improved customer satisfaction
- selling inventory before it goes out of season or out of date.