I have a client who runs a crafting business from home. AS it is near her year end I need to advise her on doing a stock take/valuation. She panicked when I mentioned it as she says she has loads of stuff.
Any recommendations on how I should advise her to go about it/ I have not dealt with this before and whilst I understand how to deal with it in the accounts its the pratciality I am unsure of
Sell it to her as something that is good for her to do rather than a chore.
Its a great opportunity for her to review stock to determin lines that are slow moving, damaged or obsolete. And that should feed into her business planning for the coming period. i.e. the great line with 200% markup over selling price that didn't sell a single unit probably wasn't such a great line to get into!
There's also the issue of missing stock that she expected to be there and stock that she has that may have somehow slipped throughthe net.
I find that many small businesses do not process returns properly and that screws up their stock a treat.
Start her with a stock take sheet and she goes through everything ensuring that once counted it is not recounted.
A stock take sheet is nothing special. Just an item/stock number. Short description, number held. Later you add when purchased and purchase price, then you add current cost price. That data should be all that you need and is the starting point of loads of fun time spent with Excel pivot tables (am I sad or what).
The sheets need to be numbered so that its easy to identify if a sheet gets seperated.
Seperate items that are purchased but not yet shipped from real stock. Its a good idea to just have a cut off rather than processing orders during the stock take.
Your client has complained that there is loads of stock.
That means that shes seeing it as the big picture rather than the individual boxes making up the picture.
To look at a stock take you need to think of it as every box you count is one box less. Not look at it that 1 done 12000 to go.
Try to get her to see that a journey of a thousand miles starts with a single step. You don't look a thousand miles ahead, you just look at the next step and before you know it your journeys done.
Hope that helps for starters, sure that others will be along soon with lots more practical tips.
kind regards,
Shaun.
p.s. If you go in to review her stock take from your perspective for what you would be looking for think of this Mnemonic : STIFF MOD
Slow moving stock
Theft of stock
Inapropriate estimates
False Sales
False stock take records
Misrepresentation of Work in Progress
Obsolete stock
Damaged stock
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Im in the same position - new client - year end last October but only traded for small part of this (Wants to leave year end where it is!), persuaded him to do the stock take and he now has a list of items held at the year end. Ive advised he needs to put some values to this list. Can you advise how best to do this and what he can include?
He imports from China, invoices are in US dollars, none of stuff yet paid for but invoice converted to sterling as imports arrive - using HMRC rates for the books. So should he use this sterling 'cost' rate? He has had refunds of VAT, but can he then include the other costs into the 'cost' price eg duty/transport etc?
Or shall I just ask his own Accountant and stay out of it?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position