Keeping track of your stock
Published On February 17, 2015 » 1673 Views» By Administrator Times » Features
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SME cornerONE of my clients who engaged me to renew his certificate with the Government department for procurement of goods and services, raised concern to me on the stationery merchandise safety which had increased in stocks over a period of time and from my own observation he was right.
It was very probable that unfaithful workers can pick up any item and sell it without the business owner noticing that the item was missing from the existing stocks.
More than half of the businesses pursued in this country by Small and Medium Enterprises (SMEs) are trade oriented.
This is buying and selling of finished products ranging from clothes, shoes, stationery items through to foodstuffs, cosmetics products, and hardware goods among others.
However, the major challenge most SMEs face in this area is accounting for merchandise stocks.
“Mr Konge my stocks have increased over the period and my worry is that it is difficult for me to trace stocks and I may not know whether one item is missing or not’ the client would lament.
And when I looked at the stocks they were almost spilling from his small shop and very prone to thefts.
Accounting for merchandise stocks is an important and interesting activity in any business because merchandise represents a significant portion of the working capital of the trading business.
Measurement and valuation of stocks poses serious problems in trading business and it is important to mention here that stocks are the reason for the existence of the trading business in order to satisfy the needs of the customers.
Proper control and valuation of stocks in a trading business is crucial for determining whether the business is making profits or not.
Stocks control is necessary to ensure that:-
•Sufficient stocks are available to satisfy the needs of the customers.
•That excessive unwanted stocks venerable to deteriorate or likely to become obsolete are avoided.
•That misuse or theft is minimised.
Therefore, stocks must be secured in a place that is protected from unauthorised persons and only to people assigned with such responsibilities should be allowed to operate stocks.
The proper valuation of stocks is important in the sense that stocks affect the determination of the income in a business.
For example if the stocks are known at the price they were acquired and the price they will be sold at, the business can be able to project the income and the profit the merchandise will bring forth and this can help the business owners to plan ahead.
However stock valuation in SMEs has always posed difficulties especially during the period of changing prices.
Most SMEs shy away from conducting stock-taking for them to determine the value of stocks and to know whether stocks are being tempered with or rather not to invest in the unwanted stocks for fear of locking the working capital in the items that are slow moving or not moving at all.
However coming to my client’s concern and those SMEs that may have similar problems my advice is that the first thing to do is to ensure that stocks are secured.
The second thing to do is to ensure that perpetual method of stocking is applied for items that are difficult to identify but are numerous.
I know this is a tedious exercise but this is important to keep track of stocks at hand.
Perpetual stock taking can always be done once in month in order to constantly update stock records.
This will prevent thefts from unfaithful employees.
Stock update computer software can be bought from the dealers or one can tailor software suitable for the business at hand.
As we earlier heard merchandise business is the business that grows in stocks to answer the needs of the customer and represent the bulk of the business.
Therefore investing knowledge in the control of stocks in a business is of the tremendous benefit to business owners.

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