The most accurate way to determine the value of stock being sold with a business at the time of changeover is to use the stock value in a Point of Sale system used by the business and where a stocktake is done, using the system, at changeover.
The resulting stock listing and valuation is based on actual buy price of the stock and not a calculation of implied cost using the retail price as a starting point.
The old school manual stocktake method relies on a physical count just like the computer stock take. The difference lies in the calculation of the cost price. Some stock takers ask the outgoing newsagent for their mark-up. Others get some invoices and work out the mark-up based on some samples – this also relies on information provided by the outgoing newsagent.
The only accurate stocktake is based on real cost price data and real stock on hand count data. Anything less is inaccurate.
It is my experience that the incoming newsagent, especially one buying a newsagency for the first time, is the most vulnerable in the current common approach to stocktaking as they don’t know of tricks which can be used to inflate the stock buy price.
As they say, let the buyer beware.
It is also worth noting that most stock taking companies can use your stock data when performing the Stock Take. They simply get an export of your stock file including the barcode and stock prices etc, and then perform the stock take on their usual devices. They can then provide you with a file containing the stock take which can be imported to update your local data with the stock on hand figures. This is an excellent and easy way to get your on hand figures correct but it does rely on you having your stock data correct.
Even with accurate data, there is a management decision about LIFO and FIFO inventory valuation methods.
There is a post here if anyone wants to understand the tricks:
http://www.ganador.com.au/retailsmart/2010/4/9/paper-profits.html
(Although good fopllowing accepted accounting practices SHOULD prevent games, unfortunately it doesn’t.)
I once worked with a new newsagent who had some school project books (can’t remember the range/publisher) that dated back to 1992 in stock!
I know one of the newsagency before they sell it, they mark all the things more than $20 for the retail price.
We got ripped off, with a heap of non returnable partworks stock, and also found they’d gone around the shop with a price gun putting up the price on the stock but not in the system!
I think it’s best if the buyer gets a professional stocktaker in and match their results to whats in the system.
We copped a bit of a battering, too. Unfortunately, previous owners didn’t have a system. Or an ounce of decency.
The lending authorities to date have insisted on an indedepant stocktaker approved by both parties. So this situation is for slaes that are cash purchases.
Michael your suggestion is the best and also keeps every one honest. So many newsagents do not have their stock properly in the computer so its a good check.
Should read independant
yep ripped off as well , i am sure everyone would just about have a story to tell . The staff informed us once we took over that the previous owner went round with a price gun just before stocktake time he even brought some jewlery from home and put it in the cabinet the over priced parker pens were in and labled them with prices as well i am talking $800 braclets thathe thought we would be dumb enough to accept as part of stock
We got ripped off in a different way.
The old owner paid his staff cash in hand. He understated the amount they were paid, and told us that you don’t really need them anyway. He always made sure that they were rostered off when we went for a visit prior to handover.
We therefore overpaid for our business. Being our first business, we did not know any better.
And yes, we also got stuck with old stock that we had to throw out as it was 10 years old.
If you use an industry stocktaker recommended by an Association I believe your complaints would be few. Have this backed by the computer read out as suggested by Michael then I believe you would satisfy all involved. I might add that even the ATO if an inspection is involved usually only accept a written stck take report by a stock taker. Perhaps someone could throw light on that in case there has been some change in procedure.
We recently purchased an LPO and used an independant stocktaker recommended by the Agent. We too were ripped off on cost price. I guess all we can do now is move forward.
When a purchaser is referred to an industry stock taker aske the Broker or referee for a number of previous clients and their contact numbers then “phone them for their version and experience. I don’t take many people’s word for amnything and I don’t expect specail rights either. Go for referals at least you’ve got something
Also ripped off. The previous owner fed in a lot of stock just prior to take over and inflated the price 300%. I am now ythe owner of pencil crayons at $9.00 a pack and enough for the whole of Perth. W#hen i discussed with the “professional” stock taker he said they were there to count the stuff not to value it. He sufgested the settlement agent should take it up on our behalf. guess what the agent was acting for both parties as recommended by the business broker. 2 Things I have learnt dont use a broker and dont use the same settlemsnt agent. When i discussed with the solicitor he suggested that i could go to court but that part odf the sale aggreement was that you accept the stock on hand. It all became to hard after no settlemsnt for 3 months. We agreed to a written down value but were still ripped off because both the settlment agent and the broker would not support us. all they wanted was for the sale to go thru so that they received their commission
we have decided to sell our newsagency and are on the process of working costs etc out good to hear these stories and some good points noted
independent, actually 😉
You’re right independent. Thank you
It happens when you grow up in an era when the teacher is allowed to smack you on the hand.
Not that it worked all the time – heh heh
The most accurate stocktake is one done using a point of sale system based on actual cost prices and non-inflated sale prices. My post is about situations where the cost price has been assumed based on data provided by the outgoing newsagent.
we got ripped off too. we used an indepentent stocktaker recomended by your brokerage graham.
the system they used was extreemly flawed, but it was my first business and having never even worked in newsagencies i didnt know any better.
they just asked the vendor what markup they had on each department and took that % off the ticket.
we did end up with only about 5 old magazines that were too old to return, but should have been picked up in the stocktake.
one more tip i would like to make is organise and have written into the contract, what will happen to the customer accounts (debittors and credditors)and if you are going to buy the accounts off the vendors, write in something for bad debits. i strongly recomend this tip.
you all may notice the number of spelling mistakes in my previous post. dont point them out. the spelling blog is next door.
The agency POS system is the best place to get stocktake figures, but accuracy depends on the accuracy of the records/system. How do you check that the records provided are correct if you don’t use an independent party such as stocktakers?
On the subject of vendors, I need to counter the bad stories with my own good one. Our vendors were fantastic in every way – they provided us with great info for the business, they took care of outstanding accounts and did not stick us with ancient, unsaleable stock. But the horror stories do provide fair warning and good advice for things to look out for when purchasing, especially if it’s your first.
Good luck to new buyers!
Thanks Wendy for a good and unbiassed comment. Newsagents can maniplulate their stock take figures for sale purposes on their computer quite easily. Most reputable Stock Takes have a business to lose and nothing to gain by beinf deceitful however slackness and inefficiency can come into it.
Like every thing we do we need to be vigilant and learn as much aas we can before we plunge into unkown depths.
And newsagentd can manipulate a manual stock just as easily.
The computer stock take is best as it leaves the incoming newsagent far better prepared and informed.
I have seen this work well with both sides represented at the count and the incoming agent able to access and approve all data before signing off the stock figure.
Mark,
You have just supported that both can manipulate if the newsagent was running the stock take. My argumnent is that a specialist approved stock taker has no such gain in doing so and therefore has a reputation to lose. ASnyone that does not get an independent (spelt it right this time) stock take is leaving themselves open for problems
Graeme a stocktaker is only as good as the advice he or she gets.
A manual stocktake is no help operationally to the business moving forward.
Mark,
You have to say that as the owner of a software company however it has no foundation whatsoever in a real transaction when making a sale. Reconsider your vested interest and how easy it is to “Bulk price change” stock prices by using Tower Systems G38 Page 1 module: Full Stock Control.
No manula stock taker can manipulate a total stock take so easily and without scrutiny. I don’t know what you’re trying to prove by discrediting stock takers (and Brokers) on your blog at a given opportunity. What is your hidden agenda?
Whether it’s manual or electronic a stock take must be independent in a sale process to have credibility and the owner of the store selling the business simply does not have that. The ATO and Solicitors conducting a sale process recongnise this and you know this, so why are you so persistent.
To all those reading this I do not have a stock taking business nor do I have any commercial or otherwise interest in one.
People get ripped off by people not machines or software. Fraud has been on a much bigger scale since computers than ever before them. So what’s your point?
Graeme,
You are jumping at shadows again. This has nothing to do with bulk price changes.
An accurate stocktake relies on having access to accurate cost prices for all items being counted and for an accurate on-hand count for those items. It does not rely on calculating back based on an average markup.
I recommend a computer based count because the audit trail is more complete than any manual process and because it leaves the business far better equipped for the future.
As for your comment about vested interest – it’s nonsense. I don’t care which newsagency software packaage a newsagency has – use it for a stock take with both sides auditing the process and the outcome will be better.
mark, you have my support on this one. the “retired newsagents” that did the stocktake at settlement in my newsagency did it wrong. i had too much other stuff to worry about and learn at the time to know any better.
i know now and will never use that basic and inaccurate method of taking a % off the rrp. that is almost criminal for everything except perhaps magazines.
graham, i do not have any financial interest in a softwear company (i do use tower softwear) and no interest in a stocktake company either. no agenders here.
peter
Mark,
Check with any registered accountant that does newsagency accounts. The greater majority as high as ninety percent have incorrect data or not sufficient data to give an accurate stock level.
Peter,
You got dudded however the stockers I know check the prices from invoice up therefore one can’t cheat. I had a newsagent recently selling $16k a week in cigarettes telling me that his G.P. Margin is 16.5%
a quick check of the invoice and a check with sell price at the counter confirm 10% G.P. plus rebate checks on a monthly basis.
You can’t cheat that system and I will as long as I have to pay I.P. Insurance will recommended that process to all incoming buyers.
No shadows Mark you made the comment which is misleading to say the least.
Of course Graeme it is never a broker or your stocktake friends. Point fingers elsewhere like you always do. You know that stocktakes have been cheated.
Ladies,
Wasnt a physical count done of the assets of the National Safety Council (Victoria) some time ago and everything was confirmed and sighted… Only problem was the same assets were being counted at multiple locations as they were moved from one to the other…
Moral of the story – if some Stocktaker or Seller wants to rip you off there are ways… all we can do is put mitigants in place to minimise the risk…
Cheers
Peter
Rarely have I seen or read so much BS regarding stocktaking. Clearly it comes from people who have either used a “cheap” stocktaker or no stocktaker at all.
When a business is changing hands, the Vendor’s back office system and/or database should NEVER be relied upon if an “independent” valuation is required.
A stocktaker can only give an “opinion” of the SAV. Use ten different stocktakers and you will get ten DIFFERENT opinions.
Stock should neither be valued at “cost price” or “replacement cost” as these valuations do not reflect the fact that the stock is not “new” (with perhaps the exception of publications, cigarettes and certain greeting cards).
It is not the stocktaker’s responsibility to determine the “saleability” of stock. The Purchaser should inspect the stock they are buying and reject any unsaleable stock. Stocktakers are not “quality control” experts and can be sued if they incorrectly reject stock on the basis of unsaleability.
A “good” stocktaker will give an “opinion” of the stock value based on independently obtained information from suppliers and/or calculations based on observations and documentation at their disposal.
Methodology can vary from one stocktaker to another. Some use barcode scanning technology, some don’t. The use of scanners can require a stocktaker to keep and maintain large databases. The maintenance of these databases costs time and money with some wholesalers charging for information.
A “cheap” stocktaker usually does not use this method but simply uses “manual” calculations based on RSP less a profit margin. In doing so they cannot rely on the integrity of the Vendor’s pricing. The stocktaker should determine the profit margin NOT the Vendor (or Purchaser).
Either way you’ll “get what you pay for”.
How do you know whether a stocktaker is “good”? It’s simple. Just ask the right questions.
Thankls Peter That’s all I have been saying.
Stocktaker, I think you’re being unfair to plenty of the comments. Many agree with you – take care, do your homework and take steps to ensure that you are not ripped off.
You mention that some wholesalers cahrge for information. There is a better approach.
Thanks to the work by some industry stock suppliers, many newsagecies have accurate databases which can be used as the basis for accurate stock takes which have the benefit of an audit trail for future use.
As I said in the original blog post, involing newsagents who are new to the channel are especially vulnerable. Hopefully some will read this thread and ask questions which they might have otherwise not asked. If that is the outcome from this them I am pleased – regardless of whether you think it’s BS as you say.
Stocktaker.
Thanks again for a more accurate account for what I have been trying to propose here. You are the experienced type of stocktaker that we have been associated with for over 20 years.
If newcomers to this industry are ravaged so badly by incompetent or crooked people then they should expose them for what they are and not denegrate the innocent hardy working honest people in this industry.
Well said stocktaker it is good to see that someone can articulate the difference with clarity and honesty. I hope those that have been taken do some homework for nobody likes to see people be taken or lose money.
No Graeme, stocktaker has not written a more accurate account of what you have said. You have been all over the place, as usual. I used a stocktaker recommended by a high profile broker. It turned out that he did not rely on proof for cost prices for most of what was counted. I estimate that I paid between $10,000 and $15,000 more for stationery than I should have. That the stocktaker was not as accurate as he could have been does not make him disreputable. Next time, if I buy another, I think I’ll use the computer system – probably with a stocktaker working that.
David you have made up your mind and no accounting of anyone elses beliefs right or wrong will change it.
It is purely a simple procedure and one of mathematics – not obviously your strong a point as emotinalism is in your case.
Good luck with your thopughts however read what I have said and although it was longer in explanation it carried the same messge. Goodbye David we both I believe exhausted the point.
Call me naive but if the majority of stock (nowdays) is being loaded from electronic invoices then wouldnt this be more reliable than any other procedure and therefore make it easier for the stocktaker? Providing it is being maintained properly of course!
The waay i see it is if you are going to be ripped off it will happen either way .you cann’t blame a stock taker when old mate that is selling the shop jacks up all the prices in the mean time . and if you are not an honest person then what is stopping you from jacking up your supply levals with a computer system ,to me that is easier than going around with a price gun (which as mentioned happened to me ) either way if someone wants to make a quick buck when they sell they will
I think the best advice I have received on stocktakes was to make sure to use the same stocktakers on exiting that were used when buying the business.
Like David, when we purchased our business we were short changed by approximately $12,000 through over-priced and old stock.
When the pressure is on for a settlement it is very hard for an individual to oversee every aspect of a stocktake, particularly when the business has absolutely no stock system and an old cash register with 10 departments.
We used stocktakers well known in the industry and recommended by the brokers – I just hope they are still around to make the same mistakes when we sell!
As someone about to purchase a newsagency can I just say THANK YOU to this blog for being such a great resource. All of the comments, event the silly personal gripes, make me more informed. I have been to the newsagent training school and got nothing like what I have learned here.
Graeme you do Mark’s article a disservice with your off track comments. He is right to raise this issue and better educate those coming into the newsagent business. It is good that articles like this can be found. I stumbled across it through a Google search.
Keep at it mark.
I have seen stocktakes by supposedly reputable stocktakers and organised through supposedly reputable brokers where both had to know that the people buying the business were being cheated. This sort of behaviour does nothing for the future of newsagents.
Guys !
I am looking to buy newsagency in Sydney. Can any one give detail of lawyer and good stocktake company. So I want get ripped off.
Thank you.
Anand, to not get ripped off, get it put in your contract that the price you pay for stock will depend on the age of stock. For example, items between 6 months and 1 year old you should only pay, 75% of wholesale and for items more than one year and less than 18 months you should pay half wholesale and for items more than 18 months old you either get for free or they toss.
Also, get your stock take done in the computer software they run – this should be more accurate and it will give you a cleaner start.
Hi everyone,
My story is slightly more shocking and reallistic, I bought a newsagents. I was talked into buying it by the letting agent after meeting with her to view another retail outlet. The newsagent was advertising the business at £8000 and I got it for an imaginary steel of £2,500 lol. There were no newspapers because he closed his account and collected the deposit. The stock, food which was apparently on his shelf was a year out of date and all of it had to be binned.
He used to sell porn mags, in the last 5 weeks I’ve had every nut within 500 miles coming into my store and one of those was a particularly persistant stalker.
Taken some time but I have managed to attract a better time of customer base into my shop.
Have to say that for anyone out there that is thinking of buying a retail outlet that is already in business do your homework, realise that if the letting agent is desperate enough they would do whatever it takes to sell you a problem that may result in more than just the loss of your business before it has even begun.
And this has been a dream of mine for a long time and that dream is the only thing that has kept me focused.