The two main methods of stock verification are:

  • Annual stock verification
  • Continuous stock verification

Annual Stock Verification

Annual stock verification is also known as periodical stock verification. Under this method, the whole of the stock is verified (audited) at the end of a given period. In normal circumstances, this is the close of the financial year.

A stock audit is also required at this time because the stock must be included in the balance sheet. Usually, stock verification lasts several days, during which storehouse operations are usually suspended.

Advantages of Annual Stock Verification

Annual stock verification benefits from several advantages, including:

  • Simplicity
  • Convenience
  • Effectiveness
  • Straightforward valuation for balance sheet
  • No extra staff required

Disadvantages of Annual Stock Verification

The method also suffers from the following disadvantages:

  • It may take several days if the storehouse is medium or large
  • Extra staff are needed to conduct and complete the verification process
  • All discrepancies are detected only once, leaving no room for corrections
  • The preparation of final accounts is usually delayed.

For small businesses, the annual stock verification method is suitable. However, for medium or large businesses, it is usually ineffective.

Continuous Stock Verification

Continuous stock verification is also known as perpetual stores verification.

This type of stock verification is carried out continuously throughout the year. Each year, a verification program is prepared at the beginning of the year, and the verification process is performed according to the program.

The program is organized such that at least once a year, every item is verified. Care is taken to check other items more regularly, particularly valuable and/or fast-moving items.

The program is kept strictly confidential. It is also necessary that store records are kept in detail and are complete and up to date. The failure of records usually leads to the overall failure of the verification program.

Advantages of Continuous Stock Verification

The first merit of continuous stock verification is that no closure of the operation of the storehouse is required. Additionally, no extra staff are required to conduct and complete the stock verification.

Another advantage is that discrepancies are promptly detected and the necessary corrective measures taken. In annual stock verification, such discrepancies are not identified until after up to 12 months.

Continuous stock verification also benefits from the fact that permanent staff are entrusted with the job of performing the verification work throughout the year.

Finally, the method can be used effectively and advantageously by large storehouses. For small storehouses, continuous stock verification is costlier than annual stock verification.

However, a medium-sized storehouse is likely to benefit from continuous stock verification.

Frequently Asked Questions

What is stock verification?

Stock verification is the process of checking that all goods in a storehouse are present, accounted for and correctly valued. The method used to verify the stocks is known as stock verification sheet.

What are the main methods of stock verification?

The two main methods of stock verification are: annual stock verification continuous stock verification.

What are the main advantages of stock verification?

The main advantages of stock verification include: it detect problems early so they can be resolved quickly and effectively preventive rather than remedial action is taken to avoid future stock fluctuations ensure all products stocked in the storehouse are correctly valued at cost or market value provide a basis for comparison with previous stock level figures.

What are the main disadvantages of stock verification?

The main disadvantages of stock verification include: it can take several days to carry out annual closures of storehouses for stock checking are required extra staff may be needed to carry out the work during periods when all members of staff are working on stock verification, there is a risk of errors being made. Stock levels cannot be fully assessed until the verification process is completed.

What is stock verification sheet?

Stock verification sheet is also known as stock taking methods, stock assessment methods, stock verifying methods, Inventory Management methods and variance analysis methods.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

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