Preparation for taking the physical inventory is very important and involves the following key areas:

(1) Housekeeping,

(2) Transactions

(3) Identification

(4) Instructions

Let us take a look at each one more closely.

Housekeeping

All stock items must be packed away in their allocated bins or shelves.  It will make the count much easier if all the goods are grouped together and not located all over the warehouse. In addition to this make sure all work ways are clear so that the counters can walk around easily.

Damaged or obsolete goods must be removed from the shelves and separated from the other stock. Preferably they should be written off and placed in a holding area, where management can decide on the course of action to be taken. 

A check must also be done to make sure that all stock is the correct weight and package size

For example if a box says it weighs 5kg it cannot only weigh 4kg. If a packet says it contains 5 units of stock, then it must contain these 5 units.  No more and no less. The equipment used here will be scales and tape measures.

Transactions

All goods issued and goods received documentations needs to be updated.  There must be no outstanding transactions for shipping or receiving goods. We must also look at all goods in transit transactions. Goods in transit are stock that we have ordered and are on the way to us. We do not have to take this into account if the goods are more than a day away. This is because there is no chance of them arriving while we are doing our count because they are too far away. If this is the case the goods do not belong to us yet, they still belong to our supplier therefore they do not have to be counted.

Any transactions for damaged or absolute stock must also be carried out.  These items cannot

be sold therefore they must be removed from our count.

It may not be possible to stop suppliers from making deliveries, but if this happens the incoming stock should be put in a demarcated area and remain unopened. No receiving transactions should be processed for this stock until the count is complete

Identification

This refers to our ability to recognize the different stock units.  Usually only a few members of staff are able to this, thus all items must be clearly marked or identified before the count can take place. This will allow us not to waste precious time trying to figure out exactly what we are counting. Figure 2b shows an item identification tag used during the preparation phase of a stock take.

Instructions

This means letting everyone know exactly what they need to do before, during, and after the count. These instructions must be clear and the same for everybody.

Counters must know exactly what area they are counting so that we do not duplicate the counts. In other words we do not want the same item to be counted by someone else. This is a waste of time. This will also allow us better control over our count as we know exactly who to hold accountable if there is a problem or if we have a query.