For every company, especially companies that deal with goods, preparing a stock book is one of the most important things. Without a good inventory book, the company’s operational activities will be disrupted.
This happens because other components of the company’s activities depend on real-time inventory data. Therefore, to be able to find out more about the stock book, let’s see together with a more complete explanation below!
Explanation Regarding the Book of Goods Stock
A stock book, also known as an inventory record, is a record that contains information about the type and amount of stock owned by a company.
The amount of stock in the inventory book includes inventory on hand, inventory that is being ordered, and inventory on hold for goods in process. Common form stock books can be found in manual or computer files.
The complexity of the inventory book actually depends on the size of the company, the variety of products processed, and production volume.
Usually a stock log book will have a description of each part and information about the type of item, the amount in stock, and its identification number.
The overall inventory record contains data about all items in stock excluding other conditions. This is usually the basis from which other types of inventory accounts can be created.
The stock book can also describe items in stock that will soon be put into production. This can make it easier for companies to track material flows in an organized manner.
In addition, the existence of a stock book also helps organizations to determine what percentage of stock is used at a certain time and whether there is too much idle inventory.
In addition, good inventory records can also provide an idea of how much stock should be kept so that in the end it can reduce the risk of excess inventory maintenance costs.
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Another common part of a stock book is a list of which items are being ordered. These records can also help the company maintain sufficient inventory by disclosing whether inventory is sufficient or lacking on a regular basis to keep production running smoothly.
With this, the company can determine whether the stock ordered is sufficient or not, and at the same time can arrange the best delivery deadline.
The inventory account will also track inventory changes including stock in the warehouse, incoming goods, and outgoing goods. Individual items can be tracked and organized by type.
There are several uses for a stock book, from providing daily financial information to preparing annual taxes.
In addition, companies can also take advantage of inventory records to develop strategies, improve operating cost effectiveness, and track production volumes in a certain period.
By understanding where each part is stored, it is possible to increase operating efficiency by rearranging and maintaining stock in the most advantageous locations for production.
Inventory accounts in the inventory book can also help companies to ensure that inventory is not wasted, lost, damaged, or made a loss.
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Stock Book Components
While there is no definite format for a stock book, there are component formats that are considered components of an inventory list in general:
1. Inventory Account
Typically, an inventory account serves as an inventory identifier in inventory control to track the status of specific items in a list.
2. Name
It represents the item name on the list to represent each stock item.
3. Description
The description on the stock book represents the details of each item. The description component might tell about some item specifications which can help identify a particular inventory item among the many of them, or maybe some general description.
4. Unit Price
This is the purchase price of the item per unit. Sometimes, if an item is purchased in different slots at a different price, it may represent the average unit price of the item as well.
5. Quantity
The quantity in the stock book contains the total number of units of a particular item in the list.
This gives an idea of whether an order to replenish inventory should be placed with the vendor or not. Each business entity has several different thresholds.
6. Value
Value is a very important column because it represents the value of an inventory item for all stock units held. It is also a type of budgeting to see at a glance how much money is tied up in supply.
7. Reorder Level
Reorder Level describes the threshold level for each line item in the list.
When the inventory quantity falls below the reorder level, orders are automatically placed with the vendor if an inventory management system is in place in the business entity.
8. Reorder Time (in days)
As the name implies, reorder time is the expected time between placing an order for a particular inventory item with a vendor and receiving the item ordered.
9. Reorder Quantity
Reorder Quantity refers to the number of fill orders that must be placed with the vendor.
This amount returns the total amount to the fulfillment level, above the reorder point
10. Discontinued
This discontinued column specifies whether a particular item is no longer being held in inventory.
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Why is it Important to Always Update Stock Books?
Keeping proper inventory records provides better inventory control and visibility into the inventory when changes occur.
Because inventory is recorded as an asset on a business’s balance sheet, you are expected to provide accurate inventory information at the end of the fiscal year or accounting period. This is why every business owner must keep proper inventory records.
1. Ensure Accurate Inventory Tracking
Consistently tracking what goes in and out of the warehouse in the stock book ensures inventory accuracy and inventory reconciliation.
Inaccurate inventory counts can lead to inventory depreciation, or when inventory is less than the balance recorded in the accounting records, and can cause large differences that can throw off profit margins and other finances.
2. Make Inventory Accounting Easier
If the company keeps accurate inventory records, then the inventory accounting process is guaranteed to run more regularly. Tracking inventory values and counting is legally required by all retailers and manufacturers, in accordance with applicable laws.
By maintaining the process of properly compiling inventory records, the company can also track changes in value and the final value of inventory at the end of the accounting period. Preparation of inventory accounting can also be done easily through inventory accounting reports.
3. Helps Prevent Items from Out of Stock
Compiling a good stock inventory record book can help companies prevent stockouts and determine when to reorder more inventory stock.
Keep in mind that not having enough inventory can cause out-of-stock issues, but holding too much inventory can increase your holding costs and leave you with the potential to build up too much dead stock.
Because inventory is constantly moving throughout the supply chain electronically, the use of real-time inventory management technology makes it easy to check whether all inventory is accounted for when comparing physical inventory and electronic records.
If inventory tracking is done digitally, the company can minimize the risk of errors and reduce operational costs.
4. Prevent Errors from Being Made Based on Incompatible Data
If your inventory records are not up-to-date, you and your team run the risk of making critical business decisions based on faulty data. By using technology to track inventory directly, companies can reduce the risk of errors that can occur due to manual calculations (human error).
Tracking goods in real-time can be done by using a stock management solution with the help of technology such as the stock goods application .
This system allows you to aggregate data by linking your upstream manufacturing activities with your downstream sales. With real-time data related to inventory, it also gives you the information you need to identify trends and forecast demand, so you can make better predictions about inventory reorder levels and quantities.
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Benefits of Stock Books
1. Track What Companies Have for Sale
By tracking all your inventory on detailed lists, you know exactly what your company has and is ready for sale or use. The process of fulfilling client orders or picking up what you need will be seamless.
But if you don’t know which items are finished and ready to be listed on a website, you’re missing out on potential profits. So knowing what you have for sale is a very good thing because it means leveraging your inventory.
2. Study Your Inventory Turnover
Inventory turnover tells you how many times your inventory is sold and replaced in stock during a certain period of time. This is also known as the inventory turnover ratio which reveals how efficient your business is currently and whether it is holding excess inventory.
Without an inventory list that outlines all of your products, inventory costs can get really out of control.
3. Find out which items are not selling
Many times, businesses may have inventory that isn’t as popular as customers expect.
Too many are ordered and the remaining unsold inventory is left sitting in the warehouse and causing storage costs.
This under-selling scenario, also known as a deadstock, is one you should avoid.
Inventory listing with inventory management software lets you know which items are not selling so you can adjust your orders as needed.
4. Spend Less on Carry Costs
Inventory listing with inventory management software makes it easy for you to spend less money on your stock keeping. This is especially true if you spend a lot of money on warehouse fees.
For example, if you know from your inventory list what is not moving, you can make the right choice to reduce the number of orders. That way, less space is needed to hold your inventory. You can then take the extra cash you’d otherwise use to cover all that stock and invest in more pressing office needs.
5. Have Accurate Income Tax Reporting
Another important aspect of inventory in a stock book is accurate year-end tax preparation. To file these taxes properly, your business must properly record year-end inventory.
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How to Make a Digital Stock of Goods Record
1. Open a New Sheet in the Accounting Support Application
You can actually take advantage of whichever app you see fit. Features and capabilities may vary slightly for each application, but the process is basically the same no matter what software you use.
Make sure you use a trusted program that has features for editing and saving the entire inventory sheet.
2. Name the title
The first piece of information you need to enter into the spreadsheet is the title for each stock column.
These column headings can be customized based on specific business types and priorities in inventory management. Common spreadsheet column headings include:
- Name of goods
- Serial number
- Cost Per Unit
- Number of Units in Stock
- Sales price
- Minimum order
- Order Time
- Supplier
3. Enter the Item and Related Information
When you prepare an inventory inventory sheet for the first time, it will take longer because you have to enter the information for each item in each column individually.
4. Save Sheets and Update During Inventory
After the inventory records have been carefully compiled, then save these documents in a location that is easily accessible on the computer.
When conducting inventory checks over a period of time, the inventory sheet can be used to update records and track changes.
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Tips for Compiling an Accurate Stock Book
Depending on the number of SKUs you sell, your order volume, and the size of your company, the complexity of keeping track of inventory varies.
No matter how complex your business is, here are some of the top inventory management strategies you can implement.
1. Keep a Physical Backup
To make inventory audits more efficient, it is helpful for retailers to keep physical records of all inventory along with online backups or vice versa. Keeping physical copies of the originals can be a legal requirement especially in tax preparation.
It can also safeguard your information in the event of a situation where the integrity of your cloud server is compromised. In this case you can get input from your accountant on what to record and how, or find an accountant you can trust and get their insights on how to keep inventory records for your business.
In most cases, the information you need during an accounting period includes COGS, production inventory (if applicable), beginning inventory, and ending inventory value (remaining at the end of the accounting period).
You can also seek advice from your accountant on how to choose the best inventory valuation method based on the types of products you sell and your typical sales volume.
2. Remain Consistent in Your Accounting Methods
There are many ways to track and record inventory. As for the method you choose, the most important thing is to stay consistent to ensure accuracy. At the end of an accounting period or financial year, you need to calculate how much your inventory is worth.
The most common valuation methods in e-commerce include:
- FIFO (first in, first out)
- LIFO (last in, first out)
- Inventory weighted average (WAC)
3. Use the Inventory Scanner
Traditionally, physical inventory counts are done with pen and paper. Staff will use physical inventory tally sheets to count products and reconcile data in their systems.
While this method can get the job done, it is very inefficient and requires double entries. Not to mention, since physically taking inventory is already a manual task, the last thing you need is to count and record data manually.
If you use a POS (Point of Sales) or item inventory management software, check to see if it offers inventory counting features that you can use. Generally, this inventory counting feature includes an app or RFID scanner.
4. Using Supporting Applications
The next strategy that you can try to compile a good stock book is to use a supporting application. If you look at the explanation on how to compile a stock book digitally or manually, some people might think that how to compile a stock book is quite complicated and challenging.
By automating real-time tracking of all inventory and changes, you can optimize inventory to meet demand and improve supply chain efficiency, so you can access all the information you need in real-time.
Based on the explanation above, it can be concluded that the inventory record book is one of the most important components for every company, so the process of preparing it cannot be done haphazardly.