This week in our business discussion concerning Small and Medium Enterprises (SMEs), we look at merchandise businesses that are involved in trading in already finished goods and whose major concern is to buy and sell with a view to earn profits.
Business analysts refer to gross profits when aggregation of such mark ups is summed up in a period under review.
When a survey is conducted across the country concerning the businesses structure in which most small businesses are involved in, the result indicate that most of them are mainly dealing in the trading of goods that are already manufactured.
Majority of these are imported from outside the country while few of them are locally manufactured.
However in today’s column concerning the merchandise businesses, I want us to look at the challenges that are concerned with stock accounting including the determination of the value of stocks as well as stock taking.
The major investment done in the merchandise kind of businesses is in purchasing of stocks being the core of the business.
For example, when one goes around town centre, shops are stocked with various finished goods such as electronic goods, cloths, hardware materials, medicine and various items.
The common denominator among this kind of businesses is that the huge investments poured in the procurement of these goods.
The holding of stocks by these businesses which deals in buying and selling of finished goods is of great importance.
The same goods are released systematically through the selling window to enable the businesses earn the desired incomes when goods are sold to intended customers and contains an element of profits or mark ups.
And because of the holding of stock by these kinds of businesses is of great importance, accounting of stocks and attaching the value both to the goods purchased and to the selling value of the commodities and knowing the aggregated mark ups is the knowledge the business should be aware of.
Stock accounting which gives the entrepreneur knowledge of the amount invested in value of the total stocks available for sale and eventually the total stocks sold during the same period for both the cost of goods and the selling price of the goods sold is very cardinal to the business owners.
This so because the business owner will know the cost price of the goods sold in the period and how much mark up has been earned by knowing the amount of the total goods sold at the selling price.
One method used in determining of the value of stocks from time to time is stock taking.
Stock taking is the procedure which is undertaken by a business in accounting the merchandise in a shop, warehouse or in any place where the merchandise is held in readiness for sale.
The stock taking is undertaken in order to know exactly the quantity and also the cost of the products at hand at the time and to also know the total sales to be yielded.
There are two types of stock takings and this is according to the merchandise the business is involved in.
There is perpetual stock taking for business with indentifiable stocks such as a business
dealing in selling of fridges and stoves while assorted stocks such as cloths,medicines and others are accounted periodically.
However in the advert of computer softwares, templates are made to update the stocks immediately a sell is made.
Let me run through the importance of stock taking before I run out of space.
• Stock taking should be conducted in order to review abnormalities show and many goods have been sold as safety’
• Stock taking should be under taken to review the level of stocks that need to be replaced immediately.
• Stock taking should be taken to review stock movement to know fast moving items or slow moving items for planning purposes.
• Other wise the main reason of stock taking is to determine how many goods have remained unsold in order for the business to know the trading profit within the period.
It is therefore important to bring into a business, stock taking in order to always be aware of thechallenges involved with the running of the merchandise related business.
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