Stock Taking and Reorder Levels: A Step-by-Step Guide

Stock taking only works when you count the same way every time and explain every difference. Reorder levels only work when they are based on how fast an item sells and how long a supplier takes to deliver. This guide shows both routines step by step, and where software saves the most effort.

Prepare before you count

Choose a quiet day. Many Nepali traders count just before Shrawan, when the fiscal year turns, but a monthly count of fast items is more useful than one huge yearly count. Before you begin:

1. Finish entering all purchase bills and sales bills up to the count time.
2. Stop or record any stock movement during the count, including deliveries and transfers.
3. Tidy the godown so each item sits in one place with its label facing out.
4. Print or write a counting sheet showing item, unit and location but not the book quantity. Staff who see the expected number tend to write it down.

Count in pairs

One person counts, another records. For high value items, a second person recounts independently. Count in the smallest practical unit and note loose items separately from sealed cartons. Mark counted items with a sticker or chalk so nothing is counted twice or skipped. Damaged, expired or returned goods go into their own area and are counted as such.

Compare and investigate differences

Enter counted quantities and look at the differences. Do not adjust anything yet. For each item that is off, check these causes in order:

• A bill entered under the wrong item or unit, for example pieces entered as cartons.
• A purchase received but not entered, or entered twice.
• A transfer recorded on one side only.
• A sales return not added back.
• Goods given as samples, damaged or lost with no entry.
• Plain counting error, which a recount will show.

Software makes this quick because the stock ledger for one item lists every movement with date and user. In a paper register you must turn pages for each suspicious item.

Post adjustments with reasons

Only after investigation, post the adjustment. Give each one a reason such as breakage, expiry, theft suspected or counting correction, and have an owner or manager sign off on large ones. Keep the signed counting sheet. Your accountant and auditor will ask how closing stock was valued and counted, and a dated sheet answers that.

Setting reorder levels

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

Step	Example approach
Average daily sale	Take sales of the last two or three months and divide by days. Exclude unusual spikes.
Lead time	Days from calling the supplier to goods arriving on your shelf. Include road delays, strikes and festival closures.
Safety stock	Extra quantity for late deliveries or a sudden rise in demand.
Reorder level	Average daily sale times lead time, plus safety stock.

Set a maximum level as well, so a generous supplier scheme does not leave you with a year of stock and no cash. Review levels before Dashain and Tihar, school opening and the wedding season, because demand changes sharply and last year's average will mislead you.

Sort items by importance

Do not give every item the same attention. Rank by yearly sales value. A small number of items usually bring most of the sales, so count those monthly and keep tight levels. The long tail can be counted less often with looser levels. Also list items with no sale in a long time and decide whether to discount, return to the supplier or stop buying.

Handle special cases

Some stock does not fit a simple routine. Goods in transit, bought and paid for but not yet received, should not be counted as stock on the shelf, yet you must not forget them either. Keep a separate list of open purchase orders and check it against deliveries each week. Goods held for a customer who has paid in advance should be marked reserved so they are not sold twice. Items on consignment belong to someone else and should be recorded apart from your own stock. Returned goods waiting for a decision need a quarantine area and a clear status, not a corner of the shelf.

Seasonal goods deserve a plan before the season, not after. Work out how much you sold in the same Nepali month last year, ask suppliers about lead times around Dashain and Tihar when transport slows, and decide in advance what you will do with leftovers. A planned clearance in Magh is better than a surprise pile in Falgun.

Make counting a habit, not an event

Businesses that count only once a year dread it because so much has built up. Businesses that count a small section every week find errors while memory is still fresh. Divide the godown into zones and count one zone each day on a rotating schedule. By the end of the month every zone has been checked, nobody has stopped work for a full day, and the yearly count becomes a formality. Keep the sheets, because a trail of regular counts also shows your auditor that stock records are taken seriously.

Where software helps

The WebsNP inventory software can hold counting sheets, show differences against book quantity, store reorder and maximum levels per item and produce a list of what is below minimum. You still make the buying decision, but you make it from data. If your goods have shelf life, read how batch and expiry work in pharmacy management software, which uses the same idea.

Your next step

This week, pick your twenty fastest items. Count them, find the daily sale and lead time and write a reorder level for each. Next month compare the result with what actually happened. If you want this to run on its own, message us on WhatsApp for a demo.

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