Q Why should I have regular stock audits?
A To keep your business under control, to know what’s going on and most importantly to know what profit you are generating on a regular basis
Q Are there any other advantages?
A Yes there are several, some of which are detailed below.
- To know the extent of any leakage
- To know how much cash is tied up in the operation.
- To know and check the yield of each container.
- To know the value of allowances and wastage.
- To know the gross profit achieved on each product stocked.
- To know and identify low selling products.
- To know that liquor and food are always being monitored.
Q Does my till not do all this for me?
A It does to an extent, but according to the type of machine, only gives limited data and that is reliant on accurate input. A qualified stock auditor will, if possible, match his sales, per item, against those on the till roll thereby identifying any discrepancies.
Q Who should do my stock audits?
A Anyone with the letters FILSA or MILSA after their name. This means that they are properly qualified members of the
Q What will the stock auditor do when he arrives?
A He or she will arrive at a pre arranged time, count all the stock, extract the purchases from invoices or delivery notes, check cost prices, establish the revenue for the period and discuss allowances, such as pipe cleaning or spillage. The auditor will either produce a result on site or he will take the work away to be processed.
Q How often should stock be taken?
A This depends very much on turnover, but usually stock audits are done on a monthly cycle or at the most, every six weeks. Unless a very small unit, it is foolhardy to leave longer gaps between visits.
Q What will a stock audit cost me?
A Every premise is different and a stock auditor will base his quotation on travelling time, amount of work involved, anticipated time on site and any other special or unusual circumstances.
Many licensed businesses do not employ a stocktaker to carry out regular stocktakes, they think it is an expense that they can do without - and any way they are happy with the Gross Profit they are achieving on their annual accounts.
Here is an example of how this could be ( and very often is) very costly thinking.
Mark and his family run a busy hotel in the middle of
The first audit is purely a valuation, so it is another four weeks before Mark receives any useful information. On liquor this ties in with the accountants figure and shows an actual gross profit of 57.4% with an estimated one, exclusive of allowances, of 60.3%., a deficit of 2.9% or in cash terms, assuming the profit margin to be static, £8932 during his last financial year. On food there is a similar variation, but this time the difference is 3.5% or in cash over the same period £10080.
From these figures it is quite clear that Mark has a fairly major problem, but because of his complacency, he has accepted a gross profit which is several per cent lower than it should have been. In the previous nineteen months alone he has lost around £30000 plus any surplus he could have generated. This situation could have been prevalent for years, but because Mark has failed to recognise the importance of regular stock audits, he could have forfeited well over £100000. After investigation, it was established that a long term and well trusted member of staff, a friend of the family had been robbing the business and by her own admission “big time”.
The moral of this story is to emphasise the importance of knowing what profit should be achieved, and not to assume that what you are getting is satisfactory. A qualified stock auditor will keep his clients right. In Marks case a small investment in monthly stock auditing would have saved at least £100000 over the years. A frightening thought.
A STOCKTAKING REPORT WILL HELP YOU TAKE CONTROL OF YOUR BUSINESS
If there is any stock at premises subject to a changeover, it is vitally important that a professionally qualified stock auditor is present. Not only will he or she identify stock which is out of date or unsaleable, but discounts will be negotiated on short dates, and any overstocking will be taken into account in the final valuation. Both the purchaser and vendor have plenty to do that day and an efficient stock auditor will consolidate all stock on hand and produce a valuation prior to his departure. This might include such items as stationary, cleaning materials, shop stock, heating oil or any other commodity which is to be sold on to the purchaser. It is common practice for floats, if required, to be checked by the Auditor and included as an addendum to the valuation.
The auditor will generally arrive first thing in the morning. He will check the stock and then prepare his listing of food, liquor and anything else to be included. Once completed he will extract cost prices from the vendors invoices and apply these to his listing, so as to produce an accurate valuation which in turn will be shown to both parties there and then, so that any anomalies can be discussed with them and, if necessary a compromise reached. At this stage the stock auditor will normally ask each party to sign the certificate or in some cases he will oversee the exchange of funds. This very much depends upon the wording in the missives or agreement.
There is enough stress involved in buying, selling or leasing licensed premises and the presence of a qualified stock auditor will release both parties from having to worry about their stock valuation and allow them to get on with other things which are so important on that day. An agreed valuation, too, will hopefully eliminate any possibility of future arguments or disputes.
Adstock do offer a comprehensive service at very competitive rates, and their highly experienced team are well versed in this type of work. One advantage of having a proper valuation prepared at date of entry is that this provides an opening stock for an on going stocktaking service and permits an accurate assessment of the business, including actual gross profits, to be produced at a very early stage—imperative to any new venture.
bravenet.com