Piece of Cake Accounting

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Stock take and wastage

hand dropping a full black bag in an industrial bin

If you have a retail, hospitality or product-based business (and certainly one with consumables), then doing a regular stock take and keeping a good account of your wastage is very important.

It’s important to know how efficiently your business runs, your cashflow and your profit. 

Learn more about how to do a stock take, why do it and how to assess your wastage and reduce it.

How to do a stock take

I hope for many business owners the concept of what a stock take is has become very familiar to you. Essentially, it is the process of checking your ‘inventory’, or your stock. This includes everything that you have purchased and is sitting there in front of you. This could be on your shelves, in your kitchens, in your cabinets, in your fridges, in your freezers, even at your home and in other storage locations.
What is on your stock take list may differ. The focus for most hospitality businesses on a regular basis should be consumables and disposable items. However, you may choose to do a quarterly assessment of other physical items, such as linen table cloths, cushions, plants, salt and pepper shakers, cutlery, etc. These things do get damaged and go missing. For product-based businesses, you may have different priorities for different seasonal items.
For consumables, it is important to be checking dates and ensuring you are using items in date order to avoid wastage (see below), as well as to not over or under stock. A simple sheet that can be used daily (and certainly weekly) is very helpful to have to hand. It can be printed physically or you can have a digital checklist. Some online stock control systems (including your point of sale/sale system) will allow you to print out stock sheets to use.
Individual items should be counted as well as ‘opened’ packets or packs, and recorded. Importantly, once the stock take has been completed this should not only inform any ordering that needs doing but, also, any stock control systems must be compared and updated too. Take the time to consider any discrepancies and how they occurred.
Remember that as a business owner the task of a stock take does not have to fall to you, however, you should ensure that your staff and managers are trained to do it not only competently, but that they understand what they are doing and why.

Why do a stock take

There are lots of reasons to do regular stock takes – not just from a health and safety perspective, but from a ‘good business practice’ perspective too. Let’s explore these:

Keeps track of your cash

A good way to think of your stock is as little bits of money! Everything that is sat on your shelves, in cupboards, or in your fridge is an item that you have paid for, but are yet to sell, so essentially it’s still your cash. 

A stock take makes sure you can keep track of that ‘cash’, where it is, where it goes, and how it ‘comes back to you’ when you sell it. 

Gives you a fuller picture of your business

An accurate list of your stock also ‘tells another story’ as part of your accounts. For example, if you have bought in bulk, you may not sell all of those items in a single month. Therefore, any monthly figures become skewed because the cost of the bulk purchase needs to be ‘shared’ across the months it will take to sell the items through.

Without your stock take, this essential piece of information (or piece of the puzzle) is missing. With a stock take, it’s clear to see. It also means that you can assess whether bulk buying is worth it. Are the discounts enough and are you not wasting the extra you buy?

Ensures figures are meaningful

Doing a stock take means all of your figures are meaningful - both those reflecting outgoings, based on what you have, and incoming, based on what you no longer have left. This means you can more accurately assess actual profits. It also helps with assessing cashflow - when a business has no cash it is often because it is ‘tied up’ in the stock they hold.

Helps you make good business decisions

As I said earlier, stock is cash (or at least where it’s gone), if you are struggling with profit, it helps to assess the amount of stock you have, looking for where you are overstocking, as well as where you are understocking, and hence potentially disappointing customers with lack of availability and missing out on those sales.
It can even feed into decisions about wages and pricing of items..

Supports quality control and sensible buying

Finally, a stock take is not just about counting, it’s about checking all of the items for damage, for quality, for going out of date, and to assess if things are being overused (or even under used) based on your original estimates. 

Importantly, if you identify items that do need to be thrown away because they are damaged or out of date, it forms part of a waste management system too. …which brings us nicely to discussing wastage.

Why does wastage matter

I have two key things to say about waste…

  1. Do not hide or ignore it! 
  2. Embrace it…well, not literally, perhaps! 

If there’s one thing you can impart to your staff, it is to record wastage. If you keep accurate records, you can easily use this to improve profitability and to reduce waste going forward – which is both more sustainable and environmentally friendly, after all.

Understanding waste helps you to understand a whole load of other areas in your hospitality business, this includes:

Portion control

Are staff clear what they should using and how much? This should align closely with what you are ordering and reduce leftovers and waste (as well as over-using items). Importantly, are you giving your customers too much? For example, are plates or bowls regularly coming back to the kitchen covered in leftovers for certain items? Do people not want as much as you are giving in packets or boxes?

Preparation

Do you have the ingredients you actually need or are you over compensating and is this leading to regular waste? Could you tweak the recipe or offer more training to help this?

Division of ingredients or produce

Are packets or container sizes working for your recipes or items you sell? For example, if you are selling wine by the glass how much do you need to sell without wasting the whole bottle. Could selling small, medium and large sizes help this? Or is one size better? Or, perhaps, you need to reduce the amount you have available by the glass versus by the bottle only? 

Bulk buying vs buying what you need

We are all glutton for a bargain! Bulk buying on paper often looks like a great way to save money. However, there are two potential down sides. Firstly, you often have to outlay a large sum of cash to cover a number of months - which can really skew your figures and cause difficulties with cash flow. Secondly, you can end up wasting all of the extra stock you bought as it doesn’t sell through or get used as you expected. This means any discount or saving you got from buying in bulk swiftly evaporates…was it worth it?

How wastage records saves you money

In order to save money and increase profit, it’s important to have a clear Wastage Write Off Procedure and to keep accurate records – make this as easy and straightforward as possible.

When you have this value-laden information in front of you about what you are wasting, how much and how often, it can turn into a little gold mine of places to help you save money and improve the way your business operates.

By sitting down to assess your waste – especially when you have accurate records…remember ‘embrace it!’ … means you can make some quick decisions about a whole range of changes in your business, including buying habits, staff training and product success and profitability.

There are SO many ways to save and make your business more profitable. And, I’m very happy to share these with you when we work together. Interested? Then, book a call…and let’s enjoy some leftover cake! 😉 

Small regular tasks making a big annual impact

Stock takes and wastage assessments are just small, regular tasks that I believe can make a big difference to the profitability of your business.
Assessing the information on a monthly basis can really help you to see how your business is progressing and to make small tweaks along the way to make a big difference to your bottom line by the end of the year. As an extra pair of eyes, I can make suggestions too.
For more recommendations about good monthly habits, check out my Month End Checklist posts and download the check sheet.

While this blog aims to provide helpful information, it’s important to remember that every business and person is unique. So, before making any decisions, we highly recommend seeking professional advice. We want to ensure that you have all the support you need to make the best choices for your situation!

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