Stocktaking Valuation, FAQ’s
These FAQs cover a large area of specialised, technical areas of Stock and Stocktaking. As no two situations are the same, only the basic position is outlined. The answers do not provide a complete or authoritative statement of the law, nor do they constitute legal advice by the author. The information provided is only a snapshot: it does not create a contractual relationship nor does it form part of any other advice, whether paid or free.
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Stocktaking Valuation and the need to Assess your Stock
Q. Why do I need a Stocktaker?
A. You need a Stocktaker to get an accurate valuation of stock in your business at a particular time of the month or year. This valuation is then used to generate gross profit reports for your business. You will then be able to see if your business is performing to the expected profit margins. By accurately stocktaking you are monitoring your Profit margins, Waste, Pilferage.
Q. When do I need instruct a Stocktaker?
A. You need one, when you takeover, if you have a large SAV (Stock at Valuation), you need your own Stocktaker. If you have only a small SAV, you could share the vendors Stocktaker, though ensure that he thinks he will be working for you in the future. Bear in mind that with a small SAV, the added cost of your individual Stocktaker could add 30% plus to the bill. I have had both and it really comes down to costs. If you find that you have a lot of near date products, products that you are unlikely to sell, opened bags of food stuffs, you don’t want them, only pay for indate sealed goods. Spirits can be quantified and indate draught beer, beware of barrels with too many date lables on.
Q. If I don’t use a Stocktaker what may happen?
A. Accurate stocktaking, you may be ignoring potential losses that can be occurring every day in your business. Stocktaking highlights individual variances in beverage wastage and stock losses in the kitchen. If you have never had an independent stocktake in your business, we recommend you commission a number of stocktakes over a trial period tounderstand if there are problems in your business. If the results yield no shortfalls you will have peace of mind, however if discrepancies are identified, the Stocktaker will be able to recommend a suitable course of action to eliminate stock loss.
Q. What other points will the Stocktaker propose?
A. A programme can be implemented to prevent and identify Losses, Gross Profit Analysis, Menu Control and Cost Control Audits.
Q. Why would we need an external Stocktaker, when we have conducted an inhouse stocktakes with acceptable results?
A. If any person who has been involved in ordering or serving the stock, they should not be involved in a stocktake as there is always the risk that stock quantities could be increased or manipulated on paper to account for breakages or theft that may occur during the period. An independent Stocktaker will report the situation as it is on that day. It also saves you time and unbiased view of your business.
Q. Would a Stocktaker advise me on Staff Costs and management.
A. You need to ensure that the Stocktaker that you use can do this, Organising staff, management and staff overtime, rechecking reports, collating the stocktake results.
Q. How can I be assured that my sensitive business information will remain confidential?
A. If you instruct a Solicitor you expect client confidentiality, the same applies to StocktakersSince launching in 2004. Your confidential business information will always remain exactly that, “Confidential”.
Q. How often should I have a stocktake?
A. Retail Businesses four times per year Hospitality businesses, if there is a suspected problem, once a week for four weeks and then once per month thereafter. Several businesses do not want a stocktake on a regular basis. The main reason for this is mainly due to the cost of the stocktakes. Compare the cost of not having a stocktake with the cost of a drop of a few percentage points in your profit margin over the course of the year. By knowing what your profit margin is on a regular basis you have the information to know if you are performing in accordance with your expectations. For example, if you are expecting a gross profit margin of 58% and at the end of the year it comes in at 49% due to excessive wastage, pilferage and loss making product lines. Knowing this at the end of the year is too late to make adjustments to rectify any changes required. With regular stocktakes, you can monitor your margins and assess performance. On a turnover of £400K that’s a loss of £36k. That loss is net profit, not just gross profit!
These FAQ’s are for your guidance, more complex or specific issues, you may or will need to consult a specialist.
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