The Top 10 Tips For Undertaking Efficient Stock Control

When speaking with business owners I am constantly asked about “what is the best way to manage my stock?”

We have compiled a top 10 list of the most important things required for efficient stock control

1. Have a system – do not have your entire stock control system dependent on one staff member. What if they leave? So does your system Have a good EPOS (Electronic Point of Sale) system and know how to use it
2. Have one person responsible for overseeing stock control – this person will take ownership of the process and is responsible for tweaking the system
3. Have all of your stock, live, on your EPOS – this takes effort
4. Have your staff involved in the stock control process – especially when it comes to dealing with purchases, credits, intercompany transfers and non scanning product
5. Have a stocktaking schedule – at least four entire stocktakes per year so as to tie in with management accounts
6. Have a schedule for cycle counts – smaller monthly stocktakes of certain departments
7. Know your shrinkage (unexplained losses through theft, wasteage, breakages etc) – above two points will assist with this
8. You cannot manage if you cannot measure. See http://stocktaking.ie/the-importance-of-cycle-counts-in-your-business/
9. The organisations who spend the time on managing their stock have
   1. the best margins
   2. the lowest amount of waste
   3. Act now! Unknown losses can destroy a business if it is not managed correctly

How does your business perform?

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From my conversation with retailers I think is fair to assume that what you cannot measure, you cannot manage. Some managers however have a head in the sand attitude to their stock and how it should be managed.
With this in mind I have wrote this article to assist managers and owners with how they can have efficient stock control without having to undertake a full stocktake every time.

So firstly, what is a cycle count? A cycle count is a mini stocktake where you count a certain area of department within your operation. It is then used to either Update your EPOS and generate a variance report Or Used to provide a valuation of stock so that a margin can be calculated What will this do for my operation? In a nut shell, it provides you with a snap shot of how that department within your business is performing. Any losses are immediately highlighted and action can then be taken accordingly.

My EPOS already tells me what I have on hand, why would I want to waste resources doing this exercise?

Wrong! Your EPOS tells you what you should have on hand, your theoretical stock on hand level. What you want to know is your actual stock on hand level. The difference is what you want to know.
It doesn’t tell you the level of wastage, pilferage (internal or external), breakages etc, is within the business.

What’s best practice for dealing with cycle counts?

We recommend a regular schedule of cycle counts for each department. This of course, does depend on the stock turnover, value of the stock, level of current control measures and loss, your current accounting practices and your particular type of EPOS.
A general rule of thumb is that a stocktake of all stock is conducted four times per year and a cycle count of each department is conducted in-between each full stocktake.
This way you are

• Taking a proactive approach to you stock control (as it is this which makes you money and contributes most to losses within the business)
• You know your losses and can make adjustments accordingly and immediately
• Going back to the first line of this article – if you don’t measure, you cannot manage

How to conduct a food stocktake

The purpose of counting the food is to put a value on all of the food stock on hand. This includes all consumable food stock including breads, sandwich fillers & sauces, meats and coffee.

This post will show you how to conduct the stocktake and also how you should record the necessary data in an excel sheet.

Creating the excel document – This is used to record the stock on hand.

Sheet 1 – this should have headings such as

• Gross Sales – Incl VAT
• Net Sales – Ex VAT
• VAT amount
• Opening Stock – if it’s the first stocktake then the Opening Stock will be Zero. If a second count then the Opening Stock should be the Closing Stock from the previous stocktake
• Closing Stock – the total value of stock on the day of the stocktake
• Purchases – Total purchases for the period ex VAT
• Cost of Sales – Opening Stock + Purchases – Closing Stock
• Gross Profit – Net Sales – Cost of Sales
• Gross Profit % – Cost of Sales / Net Sales x 100

Sheet 2 – The Data Entry Sheet – This is used to record all stock items.

The columns to have in it are

• Column 1 – Product name
• Column 2 – Unit of Measure ie: case, kg, individual, pack of 6 etc
• Column 3 – Unit Cost – Ex VAT
• Column 4 – Quantity on hand
• Column 5 – Total Cost – Unit Cost x Qty on Hand

Preparing for the stocktake

• Have the correct equipment – Weighing scales, clipboard and paper, uniform including white coat, gloves and hat.
• Ensure that all fridges and freezers are clean and are easily accessible with labels facing out
• All stock is identifiable
• You know the correct cost of a portion of the product you are counting
• Have the cost prices of all dishes updated on your Data entry sheet as above. You can use this sheet to record the stock

The counting of the stock

• Record all stock been counted in the data entry sheet
• Weigh all meats, fish and high value items
• Count the units of the remaining items of stock

Transferring the data into the Excel sheet

Simply take the totals from your count sheet and then enter them into the excel sheet.

Total up the values and this then forms your closing stock total. If this is your first stocktake then this is your opening stock value for the next stocktake

Calculate the purchases for the period

If this is the first stocktake for you to complete then the purchases are zero.

On your second stocktake, say in a week’s time, you will record the total value of the purchases received ex VAT

Ensure that the dates on the delivery dockets are are within the period

Enter in the sales

Your sales reads from your EPOS (Electronic Point of Sale) will tell you what your sales are for the period.

We use the Net sales figure for profit calculations

Calculate your GP (Gross Profit)

Using the above process in Step 1.

Your stocktake is now complete and you have your Gross Profit.

Now its time to analyse the data, the result, and how improvements can be made in increase your GP. This can include reviewing your cost prices, portion control, count practices, menu analysis etc.

Patrick is Managing Director of Stocktaking.ie, Ireland’s leaders in outsourced stock control. Stocktaking.ie use the best staff, systems and technology to assist customers nationwide in ensuring that the hassle and stress is taken out of in-house stocktaking.