How to Do a Stock Take: Full Counts, Cycle Counts and Variance Investigation

What is a stock take?

A stock take is a physical count of your stock on a set date, compared with the quantities in your records. The differences are called variances. You investigate them, correct the records and fix the causes.

The count matters beyond the warehouse. Under IAS 2, inventories are measured at the lower of cost and net realisable value, and that starts with knowing what you hold. Ask your accountant or auditor how your count feeds into the financial statements.

Inventory tracking software gives you a reliable system figure to count against. If you are still choosing a system, read how to choose inventory management software in South Africa.

Should you do a full stock take or cycle counts?

Usually both: a full stock take when finance requires one, and cycle counts in between. A full count gives a complete picture on one date. Cycle counts find errors sooner, without stopping the business.

A simple way to plan cycle counts is by value and movement. Count expensive and fast-moving lines often, and slow, cheap lines less often.

Which items should you cycle count most often?

Count most often the items that cost the most to get wrong: high-value lines and fast movers. A simple way to plan this is to sort your stock into three groups.

• Group A: high-value or fast-moving lines, and items that are easy to steal. Count these most often, such as monthly.
• Group B: middle-value lines with steady movement. Count these every quarter or so.
• Group C: cheap, slow-moving lines. Count these once or twice a year.

Also count any line straight away when something looks wrong. Examples are a negative balance, a pick that finds an empty bin, or a customer complaint about a short delivery.

How do you prepare for a stock take?

You prepare by fixing the cut-off, tidying the stores and briefing the counting teams. Many count errors can be prevented before anyone picks up a scanner.

• Capture every receipt, dispatch, return and transfer up to the cut-off.
• Tidy the stores, so each product sits in one labelled location.
• Put damaged and obsolete stock in a separate, marked area.
• Check that every product has a clear description, unit of measure and barcode or tag.
• Print or load count sheets by location, without expected quantities.
• Charge the scanners and phones, and test a few scans.
• Brief teams on the procedure, the locations and who to ask.

What tools do you need for a stock take?

You need labelled locations, a way to record counts and a way to track which locations are done. Paper count sheets work for small stores. Scanners or phones work better as the range grows.

• Location labels: every bay, shelf and bin needs a clear name, so counts can be traced back.
• Product codes: barcodes, QR codes or NFC tags let counters identify items without reading long descriptions.
• Count records: sheets or a scanning app, set up for blind counting and grouped by location.
• A progress tracker: a simple list or board showing which locations are counted, recounted and closed.
• Done markers: stickers or tags for each counted shelf, removed when the count closes.

Whatever you use, test it on one aisle the week before. Problems with labels or devices are cheaper to fix before the whole team is waiting.

How do you count stock accurately?

You count accurately by following the same fixed procedure in every location:

1. Fix the cut-off. Choose the exact time the count represents. Capture all receipts, dispatches and transfers up to that time, and pause movements until counting ends.
2. Map the locations. List every store, bay, shelf and bin, including overflow areas and vehicles. Give each counting team its own set of locations.
3. Separate stock that is not yours. Mark customer stock, consignment stock and goods awaiting return. Count them separately or leave them out, as agreed with finance.
4. Count in pairs, blind. One person counts and one records, without seeing the system quantity. Count in the unit of measure on the record, such as units, not boxes.
5. Mark each location as done. Tag or tick each shelf once it is counted. This stops double counts and shows what is left.
6. Recount a sample. A second team recounts high-value lines and a random sample. Large differences trigger a full recount of that location.
7. Hand in and sign off. Teams hand in their counts and sign for the locations they covered. The coordinator checks that every location is accounted for.

Scanning helps, because it removes typing errors and records who counted each item. It does not replace the discipline of counting every location once and only once.

How do you investigate stock variances?

You investigate variances by ruling out recording errors first, and only then treating the difference as a loss. Start with the largest variances by value.

1. Recount the item and check nearby locations for misplaced stock.
2. Check the unit of measure, such as boxes counted as units.
3. Check movements around the cut-off for receipts or dispatches captured late.
4. Check transfers between branches that left one site but have not arrived.
5. Check receiving records against supplier delivery notes.
6. Check for damage, samples or write-offs that were never recorded.

What remains after these checks is an unexplained variance. Set a tolerance with management and finance, and have someone other than the counter approve each adjustment.

What should a stock take report show?

A stock take report should show that every location was counted, what the variances were and who approved each adjustment. Management and finance should work from the same report.

• Locations counted against locations planned, so gaps are visible.
• Variances by quantity and by value, largest first.
• Variances explained by the investigation, and those still unexplained.
• Each adjustment, with the reason and the person who approved it.
• Lines with variances at more than one count, which point to a process problem.
• Results by branch, when you count more than one site.

Keep the count sheets or scan records with the report. If an auditor asks how a figure was reached, you can show the original counts.

How do you run a stock take across several branches?

Use one cut-off time, one procedure and one coordinator for every branch. Otherwise, stock moving between branches can be counted twice or not at all.

• Agree the same cut-off date and time for all branches.
• Freeze transfers between branches during the count, or list every transfer still in transit.
• Use the same count sheets, units of measure and recount rules everywhere.
• Name one coordinator to collect results and chase missing locations.
• Compare variances by branch, to spot sites with repeat problems.

Stock in transit is easy to miss or count twice. Our guide on stock transfers between branches explains how to control it.

What does a stock take look like in practice?

Here is an illustrative example with fictional branches and round numbers. A distributor counts 2,000 lines across a Johannesburg warehouse and a Durban branch.

The first count shows 60 lines with variances. Recounts and document checks explain 45 of them, mostly units of measure and a transfer still on a truck. That leaves 15 unexplained variances to approve and follow up.

The lesson for the next count is clear. Train staff on units of measure, and freeze transfers before the cut-off.

How Worxit handles this

Worxit Inventory Tracking records daily stock movements and transfers between sites. Staff scan items with NFC tags, barcodes or QR codes, instead of typing them in.

• Every movement is time-stamped and linked to the user who made it, creating a full audit trail.
• The dashboard shows stock levels per branch in real time.
• Reports cover stock ageing, high-movement items and branch-level circulation.
• The movement history makes stock audits faster and less disruptive.

The dashboard licence is R600 per month, including one admin user, and extra dashboard users are R75 per user per month. Each phone, tablet or radio running the app needs a R350 monthly device licence. Prices exclude VAT.

Frequently asked questions

Sources

• IFRS Foundation, IAS 2 Inventories: how inventories are measured. This guide does not give accounting advice.