How do you take stock?

Key points to remember :

- Definition and objectives: An inventory consists of physically counting all goods or equipment in stock, then valuing them, in order to verify consistency between theoretical stock (in the system) and actual stock. It is an essential procedure for closing the annual accounts and detecting any management errors or product losses.

- Legal obligation: In France, the law requires all commercial enterprises to carry out at least one inventory per year, in order to check the existence and value of assets and liabilities. In practice, many companies carry out a general inventory at the end of the accounting period, unless a permanent or revolving system is in place.

- Types of stocktaking: There are several types of stocktaking, depending on frequency and method:annual stocktaking (once a year),periodic stocktaking (at regular intervals, e.g. quarterly),perpetual stocktaking (continuous updating in real time with software), androlling stocktaking (cyclical counting of stock sections throughout the year). Each method has its advantages, with perpetual inventory, for example, offering an instant view of stock levels in exchange for a more technological organization.

- Steps for carrying out an inventory: An effective inventory involves several key steps: upstream preparation (planning the right moment, mobilizing the team), preparation of counting media (pre-filled inventory sheets with references), rigorous physical counting of items (with double counting if possible to ensure reliability), completeness check (ensuring that no zone or item is omitted), inventory adjustment in the management system according to discrepancies found, then accounting valuation of counted inventory (monetary valuation to update accounts).

- Tools to facilitate stocktaking: Technological solutions help save time and make stocktaking more reliable. The use of inventory management software enables real-time tracking of incoming and outgoing stock, and reduces human error. For example, the HeronTrack solution offers complete digitalization of inventory and tooling management: instant location of equipment, automatic recording of every movement (via QR codes, GPS sensors, mobile scans), maintenance alerts, etc., making data more reliable and simplifying the process. In thetooling and site equipment sector, these IoT tools even enable automated permanent tool inventory - each sensor-equipped tool being detected in real time by gateways without manual intervention.

What is an inventory?

An inventory is the operation whereby a company draws up a detailed list of all the products, goods or materials it has in stock at a given moment, and evaluates their monetary value. In concrete terms, this involves physically counting each item in the warehouse, store or worksite, and then comparing these actual quantities with the theoretical stock shown in the management or accounting system. The aim is to check for discrepancies due to errors, losses, theft or untraced flows, and to update the data accordingly.

From an accounting and financial point of view, the inventory is used to value the final stock (at purchase or production cost) in order to draw up the company's annual accounts. This is a crucial step in ensuring the reliability of the financial statements, since the value of the inventory influences the calculation of the year's earnings. Beyond the purely financial aspect, regular stocktaking also contributes to good operational management: you can more quickly identify shortages that could lead to stock-outs, spot any costly overstocking , and ensure better product availability for customers. In this sense, inventory is a management tool that improves the organization of logistics flows and customer satisfaction.

Physical vs. computerized stocktaking: Traditionally, stocktaking was carried out manually (counting and noting on paper, sometimes later entered into Excel). Nowadays, it can be greatly facilitated by the use of barcode scanners, mobile terminals or directly by dedicated software interfaced with the management system. In some cases, the term " perpetual inventory" is used when the stock is continuously updated in the software after each movement. Conversely, a "classic" inventory carried out on an ad hoc basis is called intermittent or periodic. We describe these types in more detail in the next section.

Finally, it's worth noting that stocktaking isn't just good practice: it's also a legal obligation for businesses. The French Commercial Code (art. L123-12) stipulates that every trader must check, at least once every twelve months, the existence and value of the company's assets and liabilities. In other words, an annual physical inventory is mandatory, usually at the close of the accounting year. Some companies choose to do this more frequently, but the law requires a minimum of one inventory per year. Failure to do so may result in accounting and tax irregularities.

The different types of stocktaking

The way in which the inventory is carried out may vary according to the frequency chosen and the methods employed. There are four main types of inventory:

• Annual inventory: This is the general inventory carried out once a year, usually at the end of the fiscal year. It enables the company to meet its legal obligations and start afresh each year on a sound footing. The company halts operations for the duration of the exhaustive inventory count. The disadvantage is that this massive count can disrupt business (closing day, mobilization of personnel), but it provides a complete snapshot of inventory at a given date.
• Periodic stocktaking: These are more frequent stocktakings (e.g. quarterly or half-yearly), carried out during the course of the year. The aim is to check and adjust stock levels on a regular basis, without waiting until the end of the year. These partial inventories reduce the extent of discrepancies at year-end, and facilitate management by avoiding surprises. However, they are time-consuming to carry out several times a year, and remain ad hoc (in between, theoretical stock levels may differ from reality).
• Permanent (perpetual) inventory: This is the most advanced method, where stock is tracked in real time. Every stock receipt or issue is recorded as it happens, so that stock data is continuously updated. Perpetual inventory provides instant visibility of available quantities and stock value at any given time, without the need to stop the business to recount everything. In practice, it relies on a computerized system (ERP/inventory management software, possibly linked to scanners or IoT sensors) that automatically updates stock after each movement. This type of inventory greatly reduces the risk of discrepancies or unforeseen shortages, but requires technological investment and rigorous discipline in recording movements. (To find out more about perpetual inventory and its benefits, see our dedicated article on perpetual inventory.)
• Rotating (cyclical) inventory: This approach involves staggering the stock count throughout the year, in small portions, rather than counting everything at once. A schedule is drawn up to regularly count sections of stock (for example, a product family every week, or a department every month). Thus, by adding up these rotating counts, the whole stock will have been checked over the period without having to stop activity completely. Rotating inventory is often used as a complement to a permanent inventory, or between two annual inventories, to maintain a level of control. It enables continuous correction of discrepancies in a portion of the stock, while avoiding the time-consuming nature of a global inventory. However, it requires methodical organization and follow-up to ensure that all zones/products are covered over the defined period.

Each type of inventory has its own purpose. Companies sometimes combine these methods: for example, a permanent computerized inventory throughout the year, reinforced by rotating inventories targeting critical products, and closed by an annual inventory for accounting purposes. The important thing is to adopt the approach best suited to the company's size, activity and risks (theft, perishables, etc.). It is in a manager's best interest to assess the cost/effectiveness ratio of each method: a manager may appreciate that a permanent inventory offers reliable, continuous data for decision-making, while an annual inventory alone may be insufficient to steer day-to-day operations.

Key steps for carrying out an inventory

An effective stocktaking requires method and preparation. Here are the main steps to follow in order to carry out this operation properly:

1. Prepare and plan the inventory upstream : The first step is organizational: choose the right time to take inventory, so as to minimize the impact on your business. It's not uncommon for a store or depot to close temporarily "for inventory". Ideally, schedule the stocktaking during an off-peak period (for example, in the evening, at the end of the week, or on a non-working day), to avoid stock movements (sales, deliveries) disrupting the count. Set up thestocktaking team, mobilizing the necessary personnel (storekeepers, stock managers, etc.), and make sure that everyone knows their role on the day. Good logistical preparation (reservation of scanners or notepads, organization of stock to facilitate counting, etc.) will improve the speed and reliability of the process.

2. Prepare count sheets (inventory media): Before the day of the inventory, prepare the counting documents that will be used to collect the data. These may be paper inventory sheets or computer listings. These sheets should list for each item: its identifier or code (reference, barcode...), its title, and the theoretical quantity in stock according to the system, with a space for entering the quantity counted. Ideally, you should use pre-filled cards (extracted from the inventory software), to avoid having to enter references manually, and to speed up data entry. Each inventory sheet or list should be pre-numbered and correspond to a stock area or product type, to ensure that no area is overlooked. Finally, provide the team with all the necessary tools: indelible pens (no pencils, to avoid fraud or erasure), labels if needed to mark products counted, carts or stepladders to access shelves, etc. Good preparation of the supports will make counting smoother and limit transcription errors.

3. Physically count the stock: This is the heart of the inventory - the manual counting of each item. Divide up the storage areas between the designated teams, and begin counting methodically. This is usually done shelf-by-shelf, item-by-item, with the quantity counted written on the card or entered on a mobile terminal. It is advisable to carry out two independent counts by two different people, and to compare the results for each item. This double counting immediately identifies any discrepancies (a product forgotten or counted twice) and ensures the reliability of the data. In the event of a discrepancy between the two counts, an additional check is carried out on the item concerned. For the duration of the count, no stock movements should take place: suspend any sales or goods issue operations, so that the stock remains frozen. Once you have completed the count for a zone, have the sheets signed or validated by an inventory manager, thus making the figures official and avoiding any subsequent uncontrolled changes. This counting stage requires rigor, concentration and honesty on the part of all participants, as the quality of the entire inventory depends on it.

4. Check the completeness of the inventory: After the count, it's crucial to ensure that all stock has been accounted for. The inventory must satisfy the principle ofcompleteness, i.e. no goods should be left out. To do this, review the storage areas and lists: have you covered all locations(storeroom, warehouse, store, utility vehicles in the case of mobile teams, etc.)? Don't forget products temporarily stored outside the usual locations (e.g. stock set aside in an office, equipment loaned out on site, etc.). Make sure that every inventory sheet has been returned, and that no item category has been omitted. If your stock includes consumables, tools or spare parts, check that the inventory has included them, or that a separate inventory has been taken for these items if necessary. This verification step ensures that no erroneous conclusions are drawn because of an oversight in counting a portion of the stock.

5. Once you have the actual quantities counted for each item, you need to update your theoretical stock accordingly. In other words, we adjust the quantities in the inventory management software (or in the database/stock cards) so that they reflect the actual quantities counted. This adjustment operation generally consists in recording an " inventory movement ": for each part number, the stock counted is compared with the stock indicated before the inventory count, and an entry is made for the stock withdrawal or entry to correct the discrepancy. For example, if the system expected 50 units of a product and 48 were counted, 2 units are removed from stock (corresponding to a loss or past error). Conversely, if 52 units were found for 50 expected, 2 units are entered (higher actual stock, input error or previous delivery error). This actual stock update can be done manually (via an adjustment spreadsheet imported into the software), or automatically if your inventory software includes an automatic adjustment function. The important thing is to keep track of these adjustments (inventory receipts, etc.), both for internal analysis and for the accounting audit. After adjustment, your system is up to date with the right quantities.

6. Valuing stock and analyzing discrepancies: The final step is an accounting and analytical one. This involves valuing the final inventory after stocktaking, i.e. calculating the monetary value of each inventory category and of the total inventory, with a view to recording it in the accounts. This valuation follows precise methods (weighted average unit cost, FIFO/PEPS, etc., according to accounting standards) which your accounting department will apply. At the same time, analyze any significant discrepancies highlighted by the inventory: are there any notable differences for certain items between theoretical and actual stock? If so, identify the possible causes(theft, breakage, data entry error, oversight of removal, etc.). Understanding these discrepancies will enable you to take corrective action (better securing certain goods, improving the procedure for tracking outgoings, training staff in stock management, etc.). If necessary, present an inventory report to management, including the overall discrepancy rate, estimated losses and recommendations. For an executive, this information is strategic: it reveals the reliability of the internal control system and can lead to decisions (divesting dormant stocks, investing in a better tracking tool, changing logistics service provider, etc.). By valuing and analyzing your inventory, you close the inventory loop by transforming this observation into concrete actions for improvement.

If you take these steps seriously, your inventory will be complete and accurate. It's an onerous process, but one that's essential to good business management. Don't hesitate to formalize an internal inventory procedure, especially if your operations are multiplied (several depots, field teams, etc.), so that you can reproduce these good practices identically with each iteration.

What tools can help you take stock more efficiently?

Conducting an inventory manually - with paper, Excel spreadsheets and human input - can quickly prove tedious and error-prone. Fortunately, today's technological tools make inventory management much easier and more reliable. For managers seeking to optimize this process, investment in such tools can offer an excellent return on investment in terms of time saved, accuracy and visibility.

Inventory management software and barcodes: The basis for digitizing inventory is high-performance inventory management software, often integrated with ERP or accounting systems. This software makes it possible to record and track every movement (entry, exit, transfer) centrally. Coupled with barcode or QR-code scanning terminals, it speeds up counting and avoids re-entry errors. What's more, good software can automatically generate inventory documents, calculate valuations, and even flag up significant discrepancies. So, for a permanent inventory, it's virtually indispensable to have an IT solution that continuously calculates entries/exits, without which manual updating would be too cumbersome. Many companies invest in wireless barcode scanners, RFID tags or sensors to track their stocks in real time. In the retail sector, for example, mobile scanners are used to carry out daily rolling inventories on selected shelves, ensuring near-real-time updating of on-shelf stock. Similarly, in industry, warehouse management systems (WMS) combined with RF terminals make the inventory process much smoother than with paper.

IoT traceability solutions for equipment and tooling: In some sectors, "stock" isn't limited to products on the shelf. For companies managing a fleet of tools, machines or mobile equipment, inventory concerns equipment distributed in the field (worksites, vehicles, multiple sites). This is where new IoT (Internet of Things) technologies come in handy. For example, equipping each tool with a Bluetooth or GPS sensor enables it to be located and its movements tracked automatically. The HeronTrack solution is one of the innovative offerings in this field: it combines intelligent sensors attached to tools with a cloud-based management application. Tools are automatically detected as they enter or leave the warehouse via fixed gateways, and this information is transmitted in real time to the online platform. The warehouse worker no longer needs to manually clock in/out; at any given moment, he can see where the tools are, who is using them, and what condition they are in. Such a system makes it effortless to maintain an accurate and up-to-date tool inventory, even with mobile teams on different job sites. (Find out how it's possible to always havea accurate tooling inventory in our dedicated article.)

Automation and benefits for the company: By equipping itself with the right tool, a company can turn the drudgery of inventory-taking into a continuous, automated process. For example, HeronTrack offers comprehensive inventory tracking software that automates the groundwork: every stock or tool movement is recorded in real time (by mobile scan, beacon, QR code...), data is updated automatically, and alerts can be programmed for checks or maintenance. The company thus benefits from instant visibility of the status of its stocks and equipment, without having to mobilize a team to constantly recount everything manually. What's more, digitization drastically reduces human input errors or oversights, improving the reliability of inventoried data. From a manager's point of view, these solutions also offer real-time indicators useful for management purposes (inventory turnover rate, tool utilization rate, instant stock valuation, etc.), helping to make informed decisions (stocking at the right time, avoiding unnecessary purchases of already available tooling, planning investments). Last but not least, automated inventory also saves time: teams can devote themselves to higher value-added tasks than tedious manual counting. Feedback from the construction sector, for example, shows that the use of an IoT tool management solution like HeronTrack can generate savings of over 40% on costs linked to loss, theft and optimized non-use of tools.

In short, digitizing your stock inventory using modern tools is a strategic choice for more reliable management and greater efficiency. Whether using conventional inventory management software or a specialized solution for field assets, the benefits will be felt in terms of stock accuracy, responsiveness (stock always up to date, visible to all departments), cost reduction (less overstocking, fewer redundant purchases, less losses) and peace of mind during annual checks. For an executive, investing in these technologies means ensuring that the company has reliable information at all times on one of its most critical items: stock. In a context where every euro tied up in stock has to be justified, and every tool has to be operational in the field, a well-maintained - and better still, automated - inventory becomes a real performance lever for the company.

Visit the HeronTrack product page to find out more about connected tool management and automated inventory solutions.

Source: Inventory: definition and steps

Source: What is an inventory? - Fiches Pratiques Chefdentreprise.com

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