Not tracking stock


I have just joined a company who import stock from China, but do not track any of their stock. In the past all purchasing of stock has been put against materials, but obviously they are not getting any profit and loss reports. To be honest it looks as though all they are using their sage software for is calculating VAT. They have never reconciled anything at all including bank balances.

I am looking for advice as to how to get them a cost of goods sold figure for each period. In my past experience everyone I work for has tracked their stock giving them the correct figures for COGS.



  • phoenixd
    phoenixd FMAAT, AAT Licensed Accountant Posts: 68 Regular contributor ⭐ 😼 ⭐
    If stock is not tracked, what do the previous years' balance sheets look like? Is it a new company? If it is not a new company, how does the accountant account for materials - is it based on actual payments made to suppliers or sales...(?). You didn't say if it is a manufacturing company (WIP issues, etc) or simply a retail business. If ALL materials bought are posted whilst some are still in stock, that's avoidance. Obviously, if it is on cash accounting basis, it is okay. If you provide more info, someone will be able to help.
  • judithbl67
    judithbl67 Registered Posts: 9

    To be honest the accounts look in a pickle. It is a retail business and in the past they have been posting all of the stock purchases straight to purchases (5000)....along with their every day purchases,(there are no product lines set up at all on Sage) but yes they do have rotating stock, therefore in my mind this is not correct. There is an opening and a closing stock on the previous years balance sheet, but when I asked if they could give me a stock valuation they said no. Currently they are only logging the full days sales as a total to their sales figures and not posting invoice by invoice. They have also had VAT issues.

    They have been trading for 4 years and there has been no accountant involved at all.
  • CeeJaySix
    CeeJaySix Registered Posts: 645
    Not uncommon for small businesses to just adjust CoS for the value of stock held at the year-end rather than tracking value throughout the year (not necessarily particularly good practice, but not uncommon). Also common for a separate stock system to be used rather than the accounting package, so manual adjustments still need posting.

    Also posting a full day's sales is not a problem in itself - you wouldn't post a separate invoice for every penny sweet sold in a newsagent. Lumping admin costs in with purchases is a problem though and if they've had VAT issues too it doesn't sound great - what were the problems? And how far wrong is the bank balance?!

    However you will need some kind of value of stock at the year-end - surely in retail they most have some kind of stock sheets which you can combine with purchase invoices to get to a cost?
  • judithbl67
    judithbl67 Registered Posts: 9
    Thank you. The bank balance has never been reconciled since 2011 and is way out - it looks like they have just been putting in the real necessary postings such as daily sales etc.

    I was wondering if they could perhaps get me a monthly opening and closing stock and could manually adjust, as they are wanting monthly p&l reports, but to be honest not quite getting my head around that at the moment, but it does seem the easiest option.

    They are not using any stock system for valuation at the moment but I have suggested using an inventory software so that they know what they do and don't have in stock along with an up to date valuation.

    The VAT clamped down on them as it appears not all the entries had been put in and they were also being done to the wrong sage vat code. Hence, the bank balance being totally wrong as not all sales and purchases have not been entered, or even bank transfers.

    I agree that it's not a problem to post the full days sales, but I do think that they need some kind of export from their retail website etc to prove this should they be questioned.

    I have rather a large job on my hands at the moment.
  • CeeJaySix
    CeeJaySix Registered Posts: 645
    Monthly stock figures seem sensible and depending on the quantities/no. of lines it's possible to track in Excel if they don't want to invest in software. Sounds like that might be the least of your worries though.

    Agree should have sales summaries saved.

    I hope the fees are good!
  • Neillaw
    Neillaw MAAT, AAT Licensed Accountant Posts: 301 Dedicated contributor 🌟 🐵 🌟
    I would look at some kind of gross margin report, this should give you a monthly purchasing figure. Then you should be able to check the actual stock to your calculated movement.
    Job sounds a bit of a mess - good luck
  • judithbl67
    judithbl67 Registered Posts: 9
    Thank you all so much.....yes, my head is spinning at the moment.
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