Stock is money sitting on a shelf. Too little and you lose sales; too much and your cash is tied up, goods expire and thieves find an easy target. Basic inventory control keeps you between the two and gives you the figures you need for your accounts and tax.

Know what you have

Start with a stock count: list every product, how many you hold and what each cost. A physical count at least once a month, and on the last day of the financial year, tells you whether the records match the shelves. The free inventory and stock tracker with reorder alerts records opening stock, purchases and sales for each product and shows the quantity left.

Set reorder points

A reorder point is the stock level at which you place a new order. A simple way to set it:

Reorder point = daily sales x supplier lead time + a safety buffer

If you sell 10 units a day, the supplier takes 5 days to deliver and you want a buffer of 20 units, reorder when stock falls to 70. Fast-moving items need a higher buffer and more attention, and slow movers a lower one.

Order sensibly

Order enough to avoid frequent small orders, which cost more in delivery, but not so much that stock sits for months. Track what you order and what arrives with the purchase order and goods received tracker, which shows outstanding quantities and unmatched invoices.

Watch for slow and dead stock

List products that have not sold for 60 or 90 days. Discount them, bundle them or stop re-ordering. Perishables need first in, first out: sell the oldest first.

Reduce losses

  • Count stock regularly and investigate differences.
  • Limit who can take stock and record every movement.
  • Keep goods in a safe, dry place.
  • Check deliveries against the delivery note and the purchase order.

Valuing stock

At the end of the year, stock is valued at the lower of cost and net realisable value, and the value goes into your accounts and your tax computation. The cost of imported stock includes duty and clearing; the landed cost calculator and the import duty and landed cost workbook work it out. Read how to lower your landed cost legally for ways to cut it.

Stock and tax

  • Your cost of sales is opening stock plus purchases less closing stock, so a wrong count changes your profit and your tax.
  • If you are registered for VAT, keep the invoices for stock purchases to claim input VAT; see VAT for small businesses.
  • Under eTIMS, purchases need valid invoices; see eTIMS e-invoicing explained.

Pricing and margins

Your margin on each product tells you which stock deserves shelf space; see how to price your products and services and the free pricing and markup calculator.

Stock decisions depend on cash, so read how to build a cash flow forecast and use the 12-month cash flow forecast to see what a big order does to your balance. For imported stock, see how to lower your landed cost legally, and keep the purchase documents as described in how to keep business records for KRA.

Count and value stock the same way each period so the figures are comparable. Ask your accountant about your valuation method.

Common questions

How often should I count stock? Count fast-moving and high-value items weekly or even daily, and everything at least monthly or quarterly, comparing the count with your records. Frequent counts catch theft and errors while they are small.

What is a reorder point? It is the stock level at which you place a new order so that goods arrive before you run out. Work it out from how much you sell a day and how many days the supplier takes to deliver, plus a small safety margin.

How is stock valued for the accounts? At the lower of cost and selling price, using a consistent method such as first-in-first-out or average cost. Damaged and obsolete items should be written down, with a record of why.