How to Keep Record of Stock – The Best Options for Your Business

What is a stock record?

A stock record contains information about a company's inventory. It can include a description of the inventory item, quantity of stock currently available, and its location. Keeping accurate stock records is a core discipline of inventory management.

Stock records can be created manually, using spreadsheet- and paper-based inventory management methods, or digitally, using inventory management software.

A digital stock record often contains additional inventory information such as stock-on-hand value, incoming order details, and optimal reorder quantities. Digital inventory management systems are essential for maintaining accurate stock records when a company's inventory becomes too large or complex to manage on a spreadsheet.

Why it's important to keep accurate stock records

Your stock records are critical for determining what needs ordering and when. Accurately tracking stock movements ensures you don't purchase items you don't need or leave reordering too late to meet customer demand.

Key benefits of keeping up-to-date stock records:

1. Improves inventory accuracy and visibility

2. Supports correct financial reporting

3. Helps you maintain optimal stock levels

4. Informs purchasing decisions and labour allocation

5. Enables you to identify discrepancies and root causes of inventory shrinkage

A Global State of the Industry report by Fluent Commerce recently found that 58% of retail and D2C brands have below 80% inventory accuracy. Implementing a reliable stock management system and performing regular stock audits can both help you improve the accuracy of your stock records and reduce the risks of overstocking and stockouts.

What are the main ways of keeping records of stock?

There are several ways to keep record of stock. The best method for your business will depend on the complexity of your inventory control process, your budget, and how many different inventory items you need to manage.

Let's look at the three main stock control methods:

1. Pen-and-paper stock records

2. Spreadsheet-based stock records

3. Inventory management software

1. Recording stock with pen and paper

In a startup business or side hustle with few SKUs to manage, a pen-and-paper system can be effective for tracking stock levels. If you only have products numbered in two digits, this could be a practical and sensible option. You can periodically count items, or make a note every time inventory comes in and stock goes out.

Pros of using pen and paper:

• Little to no financial outlay

• Simple to use

• Straightforward view of available stock

Cons of the pen-and-paper method:

• Can quickly become inefficient when stock levels grow

• Requires time to regularly update

• Relies on an individual's accuracy

As a business grows in complexity, stock control also becomes more difficult to perform manually – and presents greater risks. Human error can lead to mistakes in data entry that could end up costing your business a lot of money.

2. Recording stock with a spreadsheet inventory management system

Using Excel or Google Sheets to track stock levels is slightly more effective than the pen-and-paper approach. Data can be input and viewed digitally to save time and reduce errors. You can also update any stock record to reflect new changes without having to cross out old information or create a new record.

Pros of using spreadsheets for recording stock:

• Allows for automatic calculations using formulas

• Saving in the cloud reduces risk of losing data

• Minimal financial outlay

Cons of the spreadsheet method for stock recording:

• Requires manual input which can be time-consuming

• Relies on an individual's accuracy

• Doesn't provide real-time stock levels

While this is a step up from the traditional handwritten method, it still requires a lot of manual input and can be prone to errors. Spreadsheet systems must also be updated every time a stock record is no longer accurate, meaning you'll spend a lot of time making manual changes to your system.

3. Recording stock with inventory management software

Inventory management software, also known as stock take software, opens a world of benefits when it comes to managing up-to-date stock levels. It allows your organisation to use valuable data and insights from this to enhance its operational processes.

Additionally, you can automatically update inventory levels whenever stock balances change. This is known as real-time inventory control and is a vital component of accurate record keeping for stock.

Pros of using inventory software:

• Accurate tracking of stock levels across various locations

• Accurate record of the real value of inventory held

• Trackability of stock age to avoid obsolescence or expiration

• Less risk of stockouts thanks to features like low stock alerts

• Fast and efficient reordering

• Cloud-based inventory software offers portability and security

Cons of recording stock with inventory software:

• May require some financial outlay

• Specialist training may be required

• Time and resources needed for integration – which may cause temporary interruption to a business

Inventory management software isn't cheap compared with spreadsheet and paper systems, but the return on investment it delivers by saving companies time and money more than make up for the extra subscription and implementation costs.

The difference between perpetual and periodic inventory systems

When you’re looking at inventory systems to use in your business, bear in mind that there are two different kinds – perpetual and periodic.

A periodic inventory system is one that typically small businesses use, where held inventory is minimal and easy to physically count. And the checking of this is done on a periodic basis.

A perpetual inventory system enables constantly updated inventory records and real-time accuracy. It's ideal for businesses that need accurate stock levels every time an item is sold or received. By using digital technologies, a perpetual system can live track inventory and automatically adjust the cost of goods sold.

It's worth noting that some businesses may still undertake what’s called cycle counting. This allows you to check how accurate your stock records are by physically counting a small selection of products on your shelves.

So even though you can rely on your perpetual inventory system 99% of the time, a cycle count could be integrated into your stock management process.

How do you maintain stock records?

When comparing the above options for recording stock, it's clear that for most businesses, pen and paper or spreadsheets are the suboptimal methods. They are typically too admin-heavy and error-prone to be effective beyond a very small scale.

For businesses dealing with above-minimal volumes of inventory, we recommend investigating whether inventory management software is right for you.

Inventory management software can help you automatically maintain accurate stock levels all year round. Here are some ways it does this:

• Barcoding for inventory management – when you're scanning stock in and out of warehouses

• Receipting purchase orders – tracking when stock is coming into your business

• Sales orders and shipments – tracking when stock is leaving your warehouse

• Software integrations that record sales and inventory changes by assigning inventory to a sale

• Manufacturing inventory software can turn multiple SKUs of raw materials into a new, different SKU for the finished product, thereby ‘using up' the components

• Automated stocktaking and adjusting your digital records against your physical inventory to record losses, for example from theft or damage

• Supplier and customer returns, of either all or part of the original purchase

• WIP (work-in-progress) – tracking where stock is in the manufacturing process

To ensure accurate records, you'll want an inventory system that integrates with all your sales and purchasing systems. For example, Shopify, Amazon, point of sale, and accounting software.

How does inventory software connect with accounting systems?

Many inventory software systems (including Unleashed) connect with accounting systems like Xero and QuickBooks. This feature allows businesses to have seamless integration of two separate – but very much linked – functions, without needing to operate in and out of various digital systems.

Other benefits of a connected accounting application include:

• Payable transactions updates. Your inventory software sends the accounting system’s payable transactions for payment and reconciliation as you receive stock, and this includes costing invoices – even from multiple suppliers.
• Receivable updates. The second you complete a sale, that information is sent through to the accounting system. As the stock moves, the stock value and cost of sale are updated in the accounting system to ensure your profit reports are correct.
• Perpetual stock updates. Your inventory system updates the accounting system in real time so you have instant visibility into all your stock movements right down to the Profit & Loss and Balance Sheet level.
• Assembly and bills. This allows you to sell bundled products without needing to pre-assemble them. With Unleashed’s kitting process, for instance, you can track the value of the stock used, giving you an accurate cost of your finished goods.
• Instant reconciliation tools. It is essential to keep your inventory software and accounting systems' data synced. To ensure there are no discrepancies, the accounting system automatically and securely reconciles your transactions to save you from hours of manual administrative work.
• Contacts. As you acquire new customers or suppliers, simply create them in your inventory management system and it updates the accounting system for you.

Are stock takes a legal requirement?

Yes – stocktaking is a legal requirement in many countries. This is because it directly relates to the taxes your business may have to pay at the end of the financial year.

For this reason, it's also beneficial to use a digital inventory management system that keeps track not only of available inventory levels, but also the specific value that inventory represents. Inventory valuation is a critical part of financial reporting for any business that holds stock.

Inventory and your financial reporting requirements

Inventory is a part of the annual financial reporting requirements that are made to the official tax collection organisation in your country.

These obligations vary from country to country, but generally any business will need to file its accounts with a government body, like the IRS in the United States, the IRD in New Zealand, ATO in Australia, and HMRC in the United Kingdom. And you may also have to do a stocktake at the end of the financial year.

Every time you buy inventory, it is a cost and an asset. And when it is sold, it is recorded as income – as well as no longer being an asset.

Alternatively, you can also record it only as an asset, and then when it is sold, it’s recorded as a cost and income. It just depends on your business and which works best for you.

Recording stock and financial reporting in the UK

In the UK, not every business will have to do a stocktake, but the HRMC requires businesses to supply the following information:

• Details of assets owned by the company
• Debts the company owes or is owed
• Stock the company owns at the end of the financial year
• The methods you used to work out the stock figure
• All goods bought and sold
• Who you bought and sold them to and from (unless you run a retail business)

For financial reporting and income statements for your business, you will need to provide the cost of goods sold and subtract this from net sales, to calculate your gross margin – which is what you will be required to pay tax on. And to find out how much inventory you have purchased and sold – as well as what needs to be written off due to theft or damage – you need to have accurate stock records.

You’ll need to calculate the value of your inventory, usually at the end of an accounting period or the financial year. And while there are a number of ways in which you can do this, the most common are:

• FIFO (first-in, first-out)
• LIFO (last-in, first-out)
• Inventory weighted average (AVCO)
• Specific identification method

What’s clear is that there are plenty of reporting requirements when it comes to the stock records of your business. So keeping records as accurate as possible is key to less stress and hassle come tax time.

Key benefits of recording stock in an inventory software system

Recording stock in an inventory software system provides benefits to all areas of a business:

1. Allows for precise decision-making. When you have 100% accuracy of stock records, there are all sorts of insights you can use in your business – like refining procedures, forecasting stock demand and planning promotions – to ensure you make the right decisions for future growth.

2. Provides specifics for sales. When you know what sells best and where, you can spend more time focusing on those products and locations. From profitable price points to identifying trends, inventory software provides a raft of useful data for your sales division.

3. Establish KPIs and check that your business is meeting those targets. If you're putting in place a strategy for your business, it's ideal that you understand how to get there. Wanting to increase inventory turnover? Then you need to know exactly what it is right now. Keen to reduce low-turning stock? You have to be able to identify those products.

4. Minimise the risk of stockouts, overstocking and dead stock. Any one of these occurring in your business can spell disaster: not enough stock, and you miss out on sales; too much and it's costing money to hold onto; and dead stock is simply a waste.

5. Reduce resources required for manual stock management. Tracking stock and doing periodic stocktakes take time and can cause disruptions to your business – time and money that could be best spent elsewhere.

6. Optimise warehouse organisation. Having a greater understanding of your stock levels, and which are most in demand, will allow you to organise your storage facilities in a far more efficient way. This provides ease of use for employees and minimises time spent procuring products.

7. Track stock across multiple locations. You can easily keep track of stock across multiple warehouses, in multiple locations, anywhere in the world, with real-time accuracy allowing you to understand whether you need to move stock.

8. Pick, pack and dispatch. Pick and pack features give you more control of your warehouse operations. You can track stock from ‘pick' right through to ‘dispatch', including track-and-trace for orders on delivery, and can even keep your staff updated via the inventory software.

For manufacturers, retailers and other product-based businesses, tracking stock can be a real headache. But it doesn't have to be. There are numerous tech solutions now available – and in a price range accessible to SMEs – to provide accurate solutions for recording stock, with many benefits that flow into other operations of the business.

Improve stock accuracy and save time with Unleashed

Unleashed is a cloud-based inventory control system that helps you monitor, update, and record accurate stock levels in real time. By reducing the need for regular manual stock takes and automating repeatable tasks like reordering and data entry, Unleashed gives you the efficiency and visibility you need to improve bottom line performance.

If you're struggling to keep accurate records of all your stock in a cost-effective way, give Unleashed a try today with a free two-week software trial.