Year-end stocktake: how to prepare so count day doesn’t drag on

The year-end stocktake has been in the calendar for a long time, yet for a production or warehouse manager it often only becomes real a couple of weeks before count day. That is when it turns out nobody has decided whether the lines will stop or keep running during the count. The same part sits on three shelves in the warehouse and in another box next to the line. The fixed asset register lists a workbench nobody has seen in ages. On count day itself, things rarely go wrong. The stocktake starts going off track earlier, when decisions aren’t taken, lists aren’t prepared, labelling isn’t done and nothing is agreed with the accountant. Count day exposes those gaps, but by then production may already be at a standstill. This article gives you a stocktake timeline: what to do several weeks ahead, the week before, on count day and after the count. The first article in the series explains what a stocktake is and where it gets stuck. Here we focus on the practical organisation.

A company holds interim stocktakes as and when it needs them. However, § 15(3) of the Estonian Accounting Act requires that, for the purposes of preparing the annual accounts, a physical inventory is taken of the balances of the accounting entity’s assets and liabilities. The law does not set a single method of physical counting or a single date for every type of asset; the exact procedure follows from the company’s accounting policies and procedures and the accounting principles it applies.

A year-end stocktake is usually broader than an interim one. An interim stocktake may cover, for example, one warehouse or product group, whereas the year-end stocktake generally checks all the asset and liability balances needed for the annual accounts. The physical count may also include tools and fixed assets that are not counted separately during the year. The fixed asset count often brings the most surprises, because by the end of the year the register and the actual situation in production may no longer match.

Nothing is counted at this stage. Instead, you agree what will be counted and how. Every decision not made here can turn into an argument in a warehouse aisle on count day.

Who is responsible overall? One person must have overall responsibility for the schedule, the lists and the final decisions. If responsibility is vaguely assigned to “the warehouse and accounting together”, questions can fall between the two departments and stay unresolved.

What is the cut-off point? The accountant fixes the book balance as at the cut-off point. If the balance is taken at midnight, but the night shift works until morning and the count starts at seven, material that went to the line overnight is the first thing to show up as an apparent shortage.

Does production stop or keep running? If the lines cannot be stopped, you need a clear rule: in what order the zones are counted, how material that has moved to the line in the meantime is recorded, and where output finished during the count is put. This is agreed in advance, not when the forklift is already standing in front of a shelf that has been counted.

What unit is used, and how are part quantities counted? The conversion between pack unit and accounting unit must be written in the header of the list. You also need a separate rule for an opened box or a part-used roll: whether the quantity is weighed, measured or estimated. Otherwise every counter decides for themselves, and the difference arises in the conversion, not on the shelf.

Are fixed assets and stock counted on the same day? They can be, but preferably from separate lists and by different people. The stock counter checks quantities; the fixed asset counter checks specific items with an asset number.

In what form is the result recorded? The report form determines what the counter writes down. If the form is only settled after the count and it has a “condition” field nobody filled in, some of the assets have to be checked again. What the report must contain is described in detail in the stocktake report article. Ask your accountant whether some of the requirements are already written into the accounting policies and procedures, and whether they fit how the warehouse actually works.

The fixed asset count starts at the computer, not on the shop floor. Check three things in the register:

• Does it contain assets that have already been scrapped or sold but whose accounting entry has not been updated? Such records create a shortage on count day whose cause lies in the books, not on the shop floor.
• Does every item have an identifier by which it can be physically recognised? A record reading “workbench, 1 pc” is not enough when the workshop has three workbenches.
• Is the location of each asset recorded? Without a location, the list can’t be put into counting order, and the counter spends time searching rather than counting.

If the count uses barcodes, QR codes or RFID tags, check early that the labels are readable and that every asset on the list is labelled. Otherwise a worn label is only discovered on count day, when there may be no time or suitable printer to replace it. Which labelling suits which environment is covered in the comparison of barcodes, QR codes and RFID.

The decisions have been made. Now you settle exactly who counts what, and with which tools.

• Count zones are divided and marked. Every shelf, zone and outdoor area belongs to exactly one counter or pair of counters. A line taped on the floor is cheaper than a shelf counted twice or a yard of containers that got missed.
• The person responsible for the assets does not count their own area alone. If the storekeeper counts their own warehouse, someone else checks the result. This is not a sign of distrust; it provides an independent check, so that if there is a difference the storekeeper doesn’t have to prove alone that they counted correctly.
• Lists are sorted by location. The counter moves through the room, not through the register. With a list sorted by product code, they may have to walk from one end of the warehouse to the other for a single line.
• The counter cannot see the book quantity. If the list shows the expected quantity, a person may unconsciously count up to that number and stop. The comparison is made after the count, not in front of the shelf.
• Equipment is in working order. Readers are charged, spare batteries are on hand, scales have been checked, and labels and markers are within reach. A battery dying in the middle of counting a shelf can mean part of the area has to be counted again.
• The warehouse is tidied. Where possible, the same part is in one place, not on three shelves and in a box by the line. Tidying is not the stocktake, but it directly affects how long the count takes.
• Incoming and outgoing goods are scheduled. Suppliers and carriers have been told when deliveries and dispatches will stop. Any goods that arrive anyway are put in a separate area and recorded on a separate list.
• The accountant has entered everything up to the cut-off point. If the previous day’s delivery note has not been entered, the goods show up as a surplus in the count, and people waste time looking for the cause in the warehouse.

One thing cannot be checked from a list: whether the counters have understood which unit they are counting in and which rules they are following. They need to be told clearly, not assumed to know.

One important principle applies on count day. The counter records what they see: quantity, condition and location. They do not decide why the result differs from the book balance. The causes are analysed later.

The count is over, but the stocktake is not. This stage decides whether the accountant will have to come back a week later with more questions.

1. Compare the count result with the book balance. Collect all the differences in one table: which asset, how much, and in which direction it differs.
2. Investigate every difference before writing anything off. Check whether an invoice or delivery note hasn’t been entered, whether the goods are booked under another code, or whether the counter made a mistake.
3. Draw up the report. Include the result, the differences, the explanations and the signatures required by the company’s procedures. The signatures show who counted, who reviewed the result and who approved it.
4. Give the accountant the information needed for the entries. State what is written off, what is added to the books and which assets have changed condition. The accountant makes the entries, but the input has to come from those who organised the stocktake.
5. Write down the conclusions. Record where and why differences arose. Also note the area that took longest to count and the reason for the delay. That becomes the first item in next year’s preparation.

• A person has been put in charge of the stocktake and the cut-off point has been set.
• It has been agreed whether and how production continues during the stocktake.
• Units, conversions and the “part-pack rule” are clearly written down and explained to the counters.
• There are separate lists for fixed assets and stock and, where needed, different counters.
• The stocktake report form is ready before the count.
• The fixed asset register has been reviewed: entries for assets that have been disposed of or retired are up to date, assets are uniquely labelled and locations are set.
• Labelling has been checked, and missing or unreadable labels have been replaced.
• Count zones, counters and checkers have been assigned and briefed.
• Lists are sorted by location, the book quantity is hidden from the counter and equipment is in working order.
• The warehouse is tidied, goods arriving during the stocktake are kept apart, and suppliers and carriers have been told the schedule.
• All entries up to the cut-off point have been made.
• On count day, quantity, condition and location are recorded; a doubtful line is sent for a recount, and the counter does not start guessing at the cause of a difference.
• After the count, results are compared, differences investigated, the report drawn up, the accountant given the necessary information and the conclusions written down.

If you have to work through the whole checklist from scratch every year because locations are not in the register, labels are worn and the causes of differences are investigated by hand, the problem is no longer the preparation. The problem is that location, condition and quantity are only recorded at stocktake time, and for the rest of the year the information is out of date.

With continuous tracking, the location and condition of assets are known all the time. As a result, production downtime can be shorter and the accountant has fewer follow-up questions.

See how a stocktake works with continuous tracking →