This is dependent on the level of control that you want to have over your business.
For example, if there was an area within your business that was running at a loss due to incorrect control procedures including stock shrinkage (a general term for unexplained stock losses) – including internal and external theft, poor portion control or dispensing practices, when would you like to know about it?
At the end of the year? Quarterly? Monthly? Weekly? Daily?
Your answer will assist you in knowing how often you should undertake a stocktake of your inventory.
In hospitality businesses such as hotels, pubs and restaurants, it is common to undertake a stocktake once per month. This way you can control your Gross Profit (GP) margin for your food and beverage. If there is a problem occurring with a loss in GP then you know about it straight away and action can be taken.
Retail businesses in the Fast Moving Consumer Goods sector (FMCG, also known as C-Store) undertake their stocktaking between one and four times per year. The business owners who have a once per year stocktake have less control over their margin and if their end of year margin is not what is expected, then the entire year has passed before they make a change to rectify a problem.
The business owners who want more control over margins undertake their stocktakes every quarter. This way, stocktake results are used in conjunction with management accounts and if a problem is occurring, you know it and can then make the necessary changes without delay.
For other retail businesses including clothing, footwear, gift and hardware businesses, it really depends on the type of stock that is on-hand and if it is prone to shrinkage. If live stock is in operation, then there should be more stock control procedures in place. Cycle counts (mini stocktakes of a particular department or product range) assist with keeping stock levels up to date and allowing the retailer to analyse variances. These variances are then investigated and explanations sought. This is good practice for efficiently managing your stock. Note: cycle counts are only effective if a follow-up variance analysis is undertaken.