How to work out the total value of the stock in your shop

"How much money's worth of goods do you have in the shop?" Many people answer hesitantly: "Perhaps fifty or sixty million". Where that figure comes from is unclear: memory, or the last big purchase. If you do not know exactly what the goods on your shelves are worth, you do not know how much cash is tied up in them. As a result, after months pass you cannot say whether the shop has grown richer or not. Working out the stock value changes that.

Why cost and not selling price

Stock value is counted at purchase price, plus transport and unloading costs. Not at selling price. The reason is simple: the selling price contains profit you have not yet earned. If you value goods on the shelf at selling price, you show yourself more than you have, because that money is not yet yours. Cost is the money that actually sits in those goods, that is, capital turned into stock.

The total at selling price is useful too, but it is a different number: "how much takings there would be if everything sold". Do not mix the two.

The three-column calculation

For every item your table should hold three numbers:

1. the balance (pieces, boxes or kg);
2. the cost of one unit;
3. the value, which is the balance multiplied by the cost.

An illustrative example:

• soap: 84 pcs × 6,000 so'm = 504,000 so'm;
• tea: 19 boxes × 48,000 so'm = 912,000 so'm;
• washing powder: 20 boxes × 96,000 so'm = 1,920,000 so'm.

Total: 504,000 + 912,000 + 1,920,000 = 3,336,000 so'm. If the shop has hundreds of items, Excel or a phone spreadsheet adds up the column for you; you only have to enter the right figures.

Which cost to use

If one item was bought at different times at different prices, there are two routes. The simple one is to use the price of the last purchase. It is quick and clear, but when prices move fast it can drift from reality. The more exact one is the average price: the total money spent divided by the total number of units. An illustrative example: 30 boxes bought at 40,000 so'm and 10 boxes at 44,000 so'm. Total spend is 1,200,000 + 440,000 = 1,640,000 so'm, so the average price for 40 boxes is 41,000 so'm. Whichever you choose, apply it every month. If the method changes, comparing months loses its meaning.

Four common mistakes in the calculation

Although the calculation looks simple, it is easy to get wrong:

• Unfit goods are included in the value. Broken or expired goods are no longer money, so write them off first.
• Selling price is entered instead of cost, and the value balloons.
• Units get mixed up: the price is for a box but the balance is entered in pieces, and the value comes out several times too high.
• The balance is taken from an old count. Last month's figure will not give this month's value.

Goods sold on credit are not part of the value either: they have left your shop, and the money owed for them is tracked separately as a debt.

What the figure is for

Work it out once a month, after a count. An important condition: the balance must come from a real count, not from the table. Otherwise you will be calculating a number on paper, not real money. The finished value answers four questions:

• Is there more or less stock than last month, and does it fit the plan?
• How much of the value sits in slow, "frozen" goods?
• How many days of sales does the stock cover?
• What is the exact value of the goods when you discuss a loan, a partner or rent?

An example for the third question (figures are illustrative): stock value is 20 million so'm and the monthly cost of goods sold is 10 million so'm. So the stock covers about two months, or 60 days, of sales. If this figure climbs month after month, the shop is piling up more goods than it sells.

Conclusion

Stock value is the shop's "wallet": it shows where your money lies. Cost, an exact balance and three columns are enough, and the table does the rest. If the balances in your records are unreliable and you cannot calculate the value precisely, the AniqHisob team can run a stock count, help find the real balance and put your records in order.