Warehouse Stocktake: Preparation, Counting and Discrepancies

Why warehouse balances diverge from the books

The causes are rarely criminal. More often it is shipments without documents, receipt against a delivery note without an actual count, item master errors, backdated issues to production and natural losses for certain groups of goods.

Each small thing is unnoticeable on its own, but over a year they add up to an amount that already affects cost of sales, the tax base and the owner's decisions.

Preparing for a warehouse stocktake

Before counting, the warehouse itself has to be put in order: goods arranged by storage location, receiving and dispatch areas separated, all documents processed and movements stopped for the items being counted.

The committee and the persons with material responsibility are appointed by an order. It helps to print count sheets in advance without book balances — this removes the temptation to copy figures from the system.

• order on the stocktake and committee membership
• processing of all receipt and issue documents
• stopping movements for the items being counted
• signed statement from the materially responsible person
• preparation of count sheets

How the count is carried out

The count follows storage locations rather than the book list: the committee walks the warehouse and records what it sees. Goods received during the count are stored separately and recorded separately.

For large warehouses a zone-by-zone approach with subsequent reconciliation of totals works well. It avoids stopping work entirely and noticeably reduces the load on the committee.

Grade mix-ups, shortages and surpluses

A grade mix-up is when one item shows a surplus and a similar item a shortage. It may be offset only if certain conditions are met: the same period, the same responsible person and similar item names. Everything else is treated as a separate shortage and surplus.

Shortages require explanations and a decision by the manager; surpluses are taken into the books. Both have tax consequences, so the decision is not made by the accounting department alone.

Slow-moving and damaged goods

A warehouse stocktake usually uncovers items that have been sitting too long: goods nearing expiry, damaged goods, goods no longer fit for sale. Keeping them in stock at full cost overstates assets and distorts the financial statements.

Such items are listed separately and a decision is made on each: write-down, sale or write-off. Every decision must be documented, otherwise the expense will not be accepted as justified.

• listing slow-moving items separately
• assessing whether they can be sold
• documentary support for the write-down or write-off
• correct recording in the books

Linking warehouse records and accounting

A stocktake shows not only current balances but also the quality of processes. If discrepancies recur year after year, the problem is not the count but the organisation of the document flow between the warehouse and accounting.

We help build this link: procedures for receipt and dispatch, deadlines for passing documents, responsibility for the item master and regular spot checks. That way discrepancies stop accumulating.

The auditor's involvement

In a financial statement audit, inventories are one of the key areas, and the auditor usually attends the stocktake to confirm the balances through their own observation.

We combine this with methodological support: we advise in advance on how to organise the count so that the result is accepted and the procedure does not have to be repeated.