Every business that holds goods has two stock figures: what the books say and what is on the shelf. A stock count tells you how far apart they are, and the gap is usually larger than the owner expects.
A count done well takes a day for a shop and a weekend for a mid-sized godown. A count done badly takes longer and gives a figure nobody trusts. The difference is preparation.
01Why the count matters
- Your profit depends on it
- Closing stock goes straight into the profit calculation. Overstate it by ₹2 lakh, and profit is overstated by ₹2 lakh.
- Your buying depends on it
- Reorder decisions made on wrong stock figures lead to both shortages and piles of slow items.
- Losses stay hidden without it
- Breakage, theft, wrong issues to the shop floor and billing errors only show up when you count.
- Your bank may ask
- Banks that lend against stock often ask for a monthly stock statement.
02Full counts and cycle counts
There are two ways to count.
A full count covers everything on one day. Most businesses do one at the end of the financial year, on or close to 31 March. It is thorough, but it stops work for a day or more.
A cycle count covers a part of the stock each week, so that every item is counted several times a year. Fast-moving and high-value items are counted more often. It catches problems earlier and does not stop the business.
A common split, often called ABC:
| Group | What it holds | Share of value | Count |
|---|---|---|---|
| A | Top 10 to 20 percent of items | About 70 to 80 percent | Monthly |
| B | Next 20 to 30 percent | About 15 to 20 percent | Quarterly |
| C | The rest | About 5 to 10 percent | Twice a year |
A Rajkot bearing distributor may find that 150 of its 2,000 item codes make up three quarters of its stock value. Counting those 150 every month is a morning's work.
03Before the count
- Fix the date and the cut-off time. For example, close of business on Saturday.
- Finish all entries up to the cut-off. Every sale, purchase, return and transfer before the cut-off must be in the books.
- Stop movement during the count. No dispatches and no receipts in the area being counted. If the business cannot stop, keep goods received during the count in a separate marked area.
- Tidy up. Put like items together, open cartons that are partly used and label loose stock.
- Print or prepare count sheets by location, listing item names and units but not the book quantity. Counters who see the expected figure tend to write it down.
- Make teams of two. One counts, one writes. Rotate people so nobody counts the area they manage.
04During the count
- Count by location,
- rack by rack and shelf by shelf, so nothing is missed or counted twice.
- Count in the unit you sell or issue
- If tiles are sold in boxes, count boxes. If wire is sold by the metre, decide how to count part coils before you start.
- Mark each location as counted
- with a sticker or chalk.
- Note damaged and expired items separately
- They are stock, but not saleable stock.
- Do not forget other places
- goods at a job worker, goods in transit, stock at a customer on approval and samples with salespeople.
05After the count: the differences
Compare the count with the book figure, item by item.
| Item | Book | Counted | Difference | Value |
|---|---|---|---|---|
| CP tap, wall mixer | 240 | 228 | -12 | -₹10,800 |
| PVC pipe 1 inch, 3 m | 600 | 612 | +12 | +₹2,640 |
| Ball valve 3/4 inch | 85 | 85 | 0 | ₹0 |
Recount every item with a large difference before accepting it. Many differences come from simple causes: a sale entered under the wrong item, a purchase entered twice, goods kept in a second location. Look for these first.
Once you are satisfied, adjust the book stock to the counted figure, with a note on the reason. Keep the count sheets with the signatures of the counters. Your CA will want them at year end.
06Valuing the count
Stock is generally valued at cost or net realisable value, whichever is lower. Damaged, expired and very old stock may need to be valued below cost. Ask your CA which method applies to your business and keep it the same every year. See dead stock.
07Bin cards and locations
Counting is much faster when every item has a fixed place. Give each rack and shelf a simple code, such as R3-S2 for rack 3, shelf 2, and keep each item in one location wherever possible. Where an item sits in two places, note both.
A bin card on the shelf, showing the item, the location and the last count, helps the counter and the person picking orders. In a factory store, the store keeper signs the card at each issue. When a count finds a difference, the bin card often shows when it started.
08Common reasons for differences
After a few counts, the same causes appear:
- Unit mix-ups
- A box of 10 billed as one piece, or a coil billed in metres and counted in coils.
- Items with similar names
- Two sizes of the same valve entered as each other.
- Returns put back without an entry
- Samples and replacements
- given to customers without a bill or note.
- Issues to the shop floor
- taken without a slip.
Fix the cause as well as the figure, or the same difference appears at the next count.
09What changes with size
A single shop can do a full count on a Sunday with family help. A factory store with raw materials, work in progress and finished goods needs a written count procedure, a supervisor for each area, and someone from accounts to reconcile the results. Businesses with several godowns should count them on the same day, or freeze transfers between them until all counts are done.
In MatruOS, stock on hand is updated by every purchase and sale, so the book figure you count against is the current one, and you can type "stock of CP taps?" in the Ask box to check an item.