Doing a comprehensive stocktake
It is a requirement of the tax office that you keep full records of all purchases and sales of stock – all transactions related to your business are of interest to the tax office.
Keeping track of where everything goes, to whom and when is a big job.
There is also spoilage – things break or products go past use by date, this also needs to be recorded and reported in your financial statements.
Keeping a thorough record of all receipts, all sales and all movement of stock – whether it be in or out the door or even between your points of business (from warehouse to warehouse) is a very big job.
There are several ways you can go about this – in an Excel spreadsheet, via Xero or MYOB or, something we do not recommend… in the shoe box!
You should undertake a physical stocktake of your stock on hand at the end of the financial year and then compare it to your computer based stock figures. Any variances should be investigated and adjusted in your records if necessary.
Most stock records are required to be kept for five years – so you also need to ensure that these records are properly stored.
Tax time is a good time to review your computer system – are you storing your files in the cloud? Do you regularly back up your files and keep the data somewhere other than your business or personal premises?
These are all good questions for a business owner to address.
The information you need to keep about your physical stocktake is:
- a list describing each article of stock on hand and its value (as at the date of stocktake)
- who performed the stocktake
- how and when the stocktake was taken – was the stocktake done on the last Saturday of the month, before or after June 30? If the stocktake was performed before or after June 30 (there are many cases when this will apply), you will need to keep a list of transactions that will affect stock numbers
- who valued the stock and the basis of the valuation – this needs to be consistent. For instance, you cannot list one stock item at the price it was purchased and another at the price in which you intend to sell it
Stocktake should take place as close to June 30 as possible – though the tax office are well aware that this is not always possible.
If June 30 falls on a Wednesday, you cannot stop your entire business to take a full stocktake, it just doesn’t make financial sense.
This is where it is important to keep meticulous records of stock movement.
Many small to medium enterprises find the tracking of stock very difficult – a bakery for instance needs to keep track of every single bag of flour, a tiler, ever tile and a tradesman every piece of stock that passes through their hands… which can be many, many things in any given week.
We at Think Accountants are here to help you!
We will help you get your books into order and to make sure that you are properly tracking all of your stock.
We can recommend the best software for you to manage your accounts – or we could even do it for you. It is all part of the service!
Call us at Think Accounts on 9428 9630 to make a time to discuss how we can help you with the HUGE job of end of financial year stocktake… among other things.