What is stocktaking?
Simply put, stocktaking is the practice of accounting for stock. The practice of stocktaking became important when retailers of varying types noticed that through the movement of stock as well as through pilferage, severe losses could occur resulting in reduced revenue and profit.
Stocktaking measures how much stock a business has in its outlets, stock rooms and warehouses. Over the course of two stocktakes, it becomes easier to see how stock has been lost, where it has been lost and who was responsible. Since its inception, stocktaking has become a standard business control and widely accepted as a form of ensuring a business remains profitable.
Stocktaking as a Business Practice is often seen as a ‘nice-to-have’ or an ‘extra’. So, as soon as the pub, restaurant, or hotel funds are running dry it is the first activity that cuts are made on. “I need to save money, so I have to reduce my stocktaking costs”. Over the years we have taken several such phone calls at Venners, and as the economy continues to struggle, we expect more in the years to come.
So, why stocktake? Steve Mayne, MD of Venners, sheds some light on why this attitude to stocktaking is actually counterproductive. In actual fact, his stance is that stocktaking should be an integral part of every hospitality business.
“After we sit down with people and explain exactly why this is the wrong way to save money – many (though not all) change their minds.” Steve Mayne says. “It’s a simple case of presenting a few real life examples and demonstrating to them why stocktakes are not a cost, they’re a way of protecting margins and cash. Then they see sense. What’s more, it is not unusual for them to realise that they might actually be better off spending more on stocktaking.”
Alright, alright, we hear you cry. Clearly the Venners MD would come out with such self-serving proclamations. Just trying to make their services relevant and needed. Prove it!
Well, how else does a pub, restaurant, hotel or indeed any hospitality business, measure its operational performance on a routine basis?
Stocktaking goes far beyond the simple counting of products. The reports that are deduced from all that data are scrutinised to help you find areas for improvement; even in the best run operations one can never be sure that a best practice has not passed them by. Without the data, or the expert to analyse the data, improving margins and profits becomes a very difficult task. Especially when the life of an operator is already extraordinarily busy. That being said, we do need to point out at this stage that our stocktakers are not the people who make the tangible difference. That is the operator. The stocktaker can give best advice and measure how it is succeeding.
Why stocktake? What are the benefits?
Stocktaking can help you achieve:
- Increased profit margins
- Higher yield
- Better control
- Reduction of stock shortages
- Reduction of stock holding
In combination all these points ensure that profits are maximised, costs are reduced and money tied up in stock is reduced.
Our team of auditors have vast and unrivalled stocktaking experience within the sector, across the full range of hospitality businesses, and throughout the country. You can bet your bottom dollar that whatever problems you are experiencing in your business, our stocktaker will have probably helped someone else to resolve a similar issue. The training (BII accredited) and internal auditing has set them up to perform to the most exacting standard. How else could you expect auditors to give concise and meaningful advice if they do not have extensive grounding in stock related matters?
So in cutting to the chase, why does spending more on stocktaking save you money in the long run?
An especially important question at a time when cutbacks are the norm. The answer is simply that stocktaking as a service is about policing performance more vigorously and forcing operators to concentrate on margins, even if only for a few hours per month. In our experience, if not forced, operators tend to focus their attentions on all other aspects of running their businesses. A stocktaker arriving at the door and spending time helping them look at the unattractive aspects of running a business is not a nice selling point, but it is a key selling point.
And it is when looking at the data that the proof of why stocktakes are so important is made more apparent. A case study in which a large pub company managed to improve their gross profits by an average amount of £3k in the space of five months is hard to argue with.
With the question ‘why stocktake?’ explained, we can conclude that stocktaking should remain an integral part of business practices.The next obvious question to ask is:
How much then should it be part of business practice?
We usually answer this question with a slightly unhelpful ‘it depends on your business’. But for the purpose of giving some form of guidance, the frequency of stocktaking should be considered in direct correlation with risk. A premises with a large cash turnover, or where there are particularly transient staff, should have stocktakes at least once a month and even more regularly when problems develop or when exposure is greatest. From there it is a sliding scale where the risk matches the turnover.
Despite this, the model of risk versus turnover, although a good indicator, is not the be all and end all answer, particularly because it relies on less tangible notions such as how management feel. The most accurate answer on the frequency of stocktaking can only be given once one of our stocktakers has come to visit your venue for an audit.
So why stocktake? The most straightforward answer is that it is a mostly self-financing business practice. It goes even beyond self-financing though, finding those areas where margins and controls can improve your overall performance. Stocktaking costs are just the sort of thing that pub operators should be investing in, not divesting themselves of. Speak to us today for a no obligation chat about your stocktaking needs.