Stock control accounting is more than knowing what's in your warehouse. It requires accurate inventory records, accurate cost tracking, and reliable financial reports.
Let’s unpack how accounting principles connect to stock control and the benefits of adopting the right system.
Why Accounting Principles Matter in Inventory Management
Stock control and accounting work together like a team. Your business can be off track if your inventory doesn’t match your financial records. For construction, fabrication, or manufacturing, this could mean delayed projects and budget issues.
WorkGuru takes the hassle out of this. It automatically tracks all
stock movements—what you buy, use, and sell. Then, it syncs them with your accounting software. No more guessing or manual fixes. Clean and accurate records keep your business running smoothly like a well-oiled machine.
Common Pitfalls in Stock Accounting
Stock control can get messy. This is especially true if you move from spreadsheets or manual methods to a digital system. Here are a few common traps that businesses often fall into:
- Manual Adjustments Gone Wrong: Manually tweaking stock levels in your accounting software might seem like a quick fix. But, it often creates more problems. Over time, these discrepancies grow. They make it hard to trust your financial reports or make decisions.
Pro tip: Avoid this. Use a system like WorkGuru. It automates stock tracking and eliminates the need for manual fixes.
- Misunderstanding Cost of Goods Sold (COGS): COGS tracks what it costs to sell or use your products. If this number is wrong, your profits will be too.
Pro tip: WorkGuru automatically calculates and syncs COGS to your accounting software. It saves you time and hassle.
- Inconsistent Stock Tracking: Skipping steps, like recording sales or usage, leads to bad data. This inconsistency affects everything from inventory to your numbers. It leaves gaps that are hard to reconcile.
Periodic vs. Perpetual Inventory Systems
When managing your stock, there are two main options: periodic and perpetual inventory systems. Each has its strengths, but which one works best for your business? Let’s break it down.
- Periodic inventory. Manually updates inventory records periodically, often at the end of a month. While simpler, it’s less accurate and doesn’t reflect real-time stock movements.
- Perpetual inventory. This system updates stock records in real-time. It logs every transaction as it happens. It supports first in, first out (FIFO), which uses the cost of the oldest stock first to keep your numbers accurate.
A Quick Comparison
| Periodic Inventory | Perpetual Inventory |
| Stock Updates | Updated periodically (e.g., monthly or yearly). | Real-time updates after every transaction. |
| Accuracy | Less accurate, with gaps between updates. | Highly accurate due to live tracking. |
| Error Risk | Higher due to manual processes. | Lower due to automation. |
| Best For | Ideal for small construction companies with minimal stock turnover. | Suits fabrication and manufacturing businesses with high stock movement. |
Curious about finding the right inventory management system for your business? Check out this helpful
guide from Xero. WorkGuru uses the
FIFO perpetual inventory system. Every stock movement—a purchase, sale, or usage—is immediately recorded. This gives you up-to-date insights into your inventory and costs at any time.
The Risks of Poor Stock Control
The impact of poor stock control extends far beyond your warehouse. Here’s what can happen if your inventory accounting isn’t up to par:
- Tax issues. Misreporting stock values can cause issues at tax time. It may lead to over- or under-reporting your profits.
- Financial mismatches. Inaccurate stock data can skew your loan applications or create asset valuation inconsistencies.
- Operational delays. Poorly tracked inventory impacts project schedules, especially in construction, fabrication, and manufacturing, where material availability is critical.
Real-life Impact: When Stock Records Go Wrong
A manufacturing business claimed they had $2 million worth of stock to secure a loan. But, when the bank requested a stocktake, their actual stock value was only $200,000. The result? The bank recalled the loan immediately, leaving the business unable to repay and forcing it to shut down within hours. This 40-year-old family business was gone in a day because their stock records didn’t match reality.
The takeaway is simple: Accurate stock records are crucial for your business’s financial stability. With tools like WorkGuru, you can avoid costly mistakes and keep your operations on track.
Why Stock Accounting Matters
Accurate stock accounting is the foundation of your business. It keeps your financial reports reliable, simplifies tax time, and ensures cash flow. Plus, it builds trust with banks and lenders, giving your business more flexibility. With strong stock management, you’ll avoid problems and keep everything running smoothly.
How WorkGuru Simplifies Stock Control Accounting
1. Automated Stock Tracking
WorkGuru automatically records every stock movement. This includes purchases, sales, transfers, and usage. It keeps your inventory records accurate and up-to-date.
2. Seamless Accounting Integration
WorkGuru syncs directly with accounting platforms like Xero, MYOB, or Quickbooks. The software adds all stock transactions, including COGS, to your financial reports on time. There is no need for manual adjustments or double handling.
3. Real-Time Insights
WorkGuru’s perpetual inventory system tracks stock levels, costs, and usage on the spot. It gives you an instant overview of your inventory.
4. Three Stock Control Methods
Choose from FIFO, batch, or serial tracking based on your needs.
5. Simplified Stocktakes
WorkGuru simplifies stocktakes. It lets you compare physical stock against system records. It has built-in tools to update discrepancies quickly.
6. Landed Costs Management
WorkGuru includes all landed costs—like freight, customs, and taxes—as part of your stock value. It then auto-calculates accurate unit costs.
Pro Tip: Use landed cost by including shipping, duties, and taxes to keep your profit margins accurate.
Final thoughts: Simplify Your Stock
Effective stock control is essential for any business managing physical inventory. Adopt accounting inventory principles, like perpetual inventory and FIFO unit costing. They will save you time, avoid costly mistakes, and gain better business profitability.
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