Stock is usually the biggest thing a small business owns, often bigger than the cash in the bank and the udhaar in the khata combined. Yet many shops track it only by eye. A simple stock register fixes that without any expensive software.
What a stock register records
One line per item, with movements in and out:
| Date | Item | Opening qty | Received | Issued or sold | Closing qty | Remarks |
|---|---|---|---|---|---|---|
| 1 Nov | Basmati rice 25 kg | 18 bags | 20 bags | 23 bags | 15 bags | Supplier bill 772 |
For a shop with hundreds of items, track the top items by value closely and group small items by category. The 80/20 rule usually holds: about a fifth of your items make up most of your stock value.
Download a ready-made stock register from our templates page.
Reorder levels: never run out, never overstock
For each fast-moving item, decide a reorder level:
Reorder level = Average daily sales × Days your supplier takes to deliver + Safety stock
If you sell 4 bags of rice a day, the supplier takes 3 days, and you want 2 days of safety stock: 4 × 3 + 8 = 20 bags. When stock falls to 20 bags, place the order.
Valuing closing stock
Your profit depends directly on the value of closing stock, so value it consistently:
- Cost or market value, whichever is lower. This is the standard rule. If an item's selling value has fallen below cost, value it at the lower figure.
- First in, first out (FIFO). Assume the oldest stock is sold first. Closing stock is valued at the most recent purchase prices. This matches how most shops actually sell.
- Weighted average. Value all units at the average cost of purchases. Simple and common for commodities whose price changes often.
Pick one method and use it every year. Switching methods changes your profit on paper without anything real changing.
The physical count
At least once a year, and ideally every quarter for high-value items:
- Choose a quiet day and stop receiving goods during the count.
- Count by shelf or section, with two people: one counts, one writes.
- Compare counted quantity with the register.
- Investigate any big difference before adjusting the register.
Shrinkage: where stock disappears
When the count is lower than the register, the gap is shrinkage. Common causes:
- Goods given on credit but not entered in the khata.
- Breakage, expiry and damage not recorded.
- Supplier short-delivery not checked at receipt.
- Theft by customers or staff.
- Free samples and personal use not recorded.
Record damages and expiries as they happen, with a note, so the count tells you about genuine losses only.
Dead stock
Items that have not sold in six months are tying up cash. List them every quarter, then discount, bundle with fast movers, return to the supplier if your terms allow, or write them off. Check the impact of any clearance discount on margin with our discount calculator.
When to move to software
Move to billing software with inventory when you have more than a few hundred items, multiple godowns, batch or expiry tracking needs (pharmacy, food), or GST e-invoicing obligations. Our expert desk can recommend a setup for your trade.
Common questions
How often should a shop count stock?
A full count at least once a year at closing, with a rolling count of high-value or fast-moving items every month or quarter.
Is closing stock an expense?
No. Closing stock is an asset on the balance sheet. It reduces cost of goods sold, which increases profit for the year.
This guide is general information to help you understand the topic. It is not legal, tax or financial advice. Rules and rates change; confirm details for your situation with a qualified professional or the official government portal. Read our editorial policy.