Six Advantages of Continuous Stock Taking in Cost Accounting

Stocktaking involves the physical checking of stock items and comparing this with an entity’s existing records. 

Continuous stock taking specifically means that stock-taking is conducted on a regular basis. 

From increasing accounting accuracy to improving stock management, continuous stock taking is attributed to a variety of advantages. 

Since entities can use this stock-taking method to ensure that they always maintain the right level of stocks to meet production requirements or customer demand, it also impacts the overall profitability of an entity. 

Here’s a look at some of the main advantages of continuous stock-taking in cost accounting. 

  • Accurate Accounts
  • Prevent Unnecessary Wastage And Losses
  • Improved Stock Management
  • In-house Experts Can Be Used
  • No Need To Shut Down Operations 
  • Eliminate Delays In Production And/Or Delivery

1. Accurate Accounts 

Continuous stock taking places a lot of emphasis on the maintenance of accurate stock records. 

As stated in the above definition, this stocktaking method involves checking physical stocks with the available records.

This means that the preparation of interim and even final accounts can be conducted using highly accurate figures. 

This is especially important considering the fact that this stock-taking method can be used to specifically keep track of high value and fast moving stock items. 

Lastly, any errors in the current stock records can be identified and resolved as early as possible. 

2. Prevent Unnecessary Losses and Wastage

Continuous stock taking can help reduce wastage and loss involving stock items. 

First and foremost, by tracking stock items on a continuous basis, entities can minimise cases of ending up with obsolete stock items, and the associated losses. 

Furthermore, tracking stock items on a regular basis works to deter employees from any cases of dishonest conduct when it comes to handling stock items. 

Finally, by maintaining the right level of stocks, businesses can eliminate the wastage associated with carrying of excess levels of stock. 

3. Improved Stock Management

By conducting a regular stock check, businesses are able to implement and maintain better stock management practices. 

A continuous stock take goes a long way towards helping businesses get a clear idea of the flow of stock items. 

The lessons learned here can be applied in the creation of accurate forecasts and budgets that reflect the actual stock movement reality. 

This can help businesses avoid cases of running out of important stock items or having too much capital tied up in excess stock. 

4. In-house Experts Can Be Used

This stocktaking method distributes the tedious and often time-consuming job of verifying stock items across the year. 

This means that businesses can assign the task to an internal staffer instead of calling on a team of external experts every now and then. 

Smaller businesses can even assign work to one of the existing employees. 

The assigned staffer can simply count stock items and enter the information in forms designed for this specific purpose, while the work of comparing actual figures to the existing records is left to the store’s clerk. 

5. No Need to Shut Down Operations 

One of the main advantages of continuous stock taking is the fact that it can be done without closing the business down. 

Entities do not have to shut down their operations and suffer the associated disadvantages to confirm stock numbers. 

Stock figures are updated on a regular basis, as receipts and issuances continue. 

6. Eliminate Delays in Production And/or Delivery 

After businesses identify the trends in stock movement, they are able to maintain sufficient stock levels to meet any fluctuations experienced throughout the year. 

This helps minimise the likelihood of production disruptions caused by running out of stock unexpectedly. 

Most importantly, it ensures that businesses can meet customer orders on time, every time. 

As you can see from the above continuous stock taking doesn’t just help businesses maintain accurate stock records, it also helps improve the overall profitability of the entity. 

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