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Everything you use to make your products, provide your services and to run your business is part of your stock.

There are four main types of stock:

• raw materials and components - ready to use in production
• work in progress - stocks of unfinished goods in production
• finished goods ready for sale
• consumables - such as fuel and stationery

The type of stock can influence how much you should keep - see how much stock should you keep?

Stock value

You can categorise stock further, according to its value. For example, you could put items into low, medium and high value categories. If your stock levels are limited by capital, this will help you to plan expenditure on new and replacement stock.

You may choose to concentrate resources on the areas of greatest value. However, low-cost items can be crucial to your production process and should not be overlooked.

Deciding how much stock to keep depends on the size and nature of your business, and the type of stock involved. If you are short of space you may be able to buy stock in bulk and then pay a fee to your supplier to store it, calling it off as and when needed.

There are several methods for controlling stock, all designed to provide an efficient system for deciding what, when and how much to order.

You may opt for one method or a mixture of two or more if you have various kinds of stock. For further information, see types of stock.

• Minimum stock level - you identify a minimum stock level, and re-order when stock reaches that level. This is known as the Re-order Level.
• Stock review - you have regular reviews of stock. At every review you place an order to return stocks to a predetermined level.

Effective stock control methods

Just In Time (JIT) aims to reduce costs by cutting stock to a minimum - see avoid the problems of overtrading. Items are delivered when they are needed and used immediately. There is a risk of running out of stock, so you need to be confident that your suppliers can deliver on demand.

These methods can be used alongside other processes to refine the stock control system. For example:

1. Re-order lead time - allows for the time between placing an order and receiving it.

2. Economic Order Quantity (EOQ) - a standard formula used to arrive at a balance between holding too much or too little stock. It's quite a complex calculation, so you may find it easier to use stock control software. InventoryOps provides information about the .

3. Batch control - managing the production of goods in batches. You need to make sure that you have the right number of components to cover your needs until the next batch.

4. First in, first out - a system to ensure that perishable stock is used efficiently so that it doesn't deteriorate. Stock is identified by date received and moves on through each stage of production in strict order.

If your needs are predictable, you may order a fixed quantity of stock every time you place an order, or order at a fixed interval - say every week or month. In effect, you're placing a standing order, so you need to keep the quantities and prices under review.

Radio Frequency Identification (RFID) allows a business to identify individual products and components and track them throughout the supply chain from production to point-of-sale.

RFID technology uses radio waves to communicate between a tag and a reading device. The tag usually consists of a microchip attached to an antenna. The reader is capable of reading data from and writing data to the tag.

RFID inventory management

An RFID tag is a tiny microchip, plus a small aerial, which can contain a range of digital information about a particular item. Tags are encapsulated in plastic, paper or similar material, and fixed to the product or its packaging, to a pallet or container, or even to a van or delivery truck.

The tag is interrogated by an RFID reader which transmits and receives radio signals to and from the tag. The information that the reader collects is collated and processed using special computer software. Readers can be placed at different positions within a factory or warehouse to show when goods are moved.

Using RFID tagging for stock control offers several advantages over other methods such as barcodes:

• tags can be read remotely, often at a distance of several metres
• several tags can be read at once, enabling an entire pallet-load of products to be checked simultaneously
• tags can be given unique identification codes, so that individual products can be tracked
• certain types of tags can be overwritten, enabling information about items to be updated, eg when they are moved from one part of a factory to another

RFID tagging can be used:

• to prevent over-stocking or under-stocking a product or component
• for stock security, by positioning tag-readers at points of high risk, such as exits, and causing them to trigger alarms
• for quality control, mainly if you make or stock items with a limited shelf life

The costs associated with RFID tagging have fallen over recent years, and continue to do so. The benefits of more efficient stock control and improved security make it particularly attractive to retailers, wholesalers or distributors who stock a wide range of items, and to manufacturers who produce volume runs of products for different customers.

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Stocktaking involves making an inventory, or list, of stock, and noting its location and value. It's often an annual exercise - a kind of audit to work out the value of the stock as part of the accounting process.

Codes, including barcodes, can make the whole process much easier but it can still be quite time consuming. Checking stock more frequently - a rolling stocktake - avoids a massive annual exercise, but demands constant attention throughout the year. Radio Frequency Identification (RFID) tagging using hand-held readers can offer a simple and efficient way to maintain a continuous check on inventory. See using RFID for inventory control, stock security and quality management.

Any stock control system must enable you to:

• track stock levels
• make orders
• issue stock

The simplest manual system is the stock book, which suits small businesses with few stock items. It helps you to keep a log of stock received and stock issued.

It can be used alongside a simple reorder system. For example, the two-bin system works by having two containers of stock items. When one is empty, it's time to start using the second bin and order more stock to fill up the empty one.

Stock cards are used for more complex systems. Each type of stock has an associated card, with information such as:

• description
• value
• location
• reorder levels, quantities and lead times (if this method is used)
• supplier details
• information about past stock history

More sophisticated manual systems incorporate coding to classify items. Codes might indicate the value of the stock, its location and which batch it is from, which is useful for quality control.

Computerised stock control systems run on similar principles to manual ones, but are more flexible and information is more straightforward to retrieve. You can quickly get a stock valuation or find out how well a particular stock item is moving.

A computerised system is a good option for businesses dealing with many types of stock. Other useful features include:

• Stock and pricing data integrating with accounting and invoicing systems. All the systems draw on the same data set, so you only have to input the data once. Sales Order Processing and Purchase Order Processing can be integrated into the system to automatically update stock balances and statistics as orders are processed.
• Automatic stock monitoring, triggering orders when the re-order level is reached.
• Automatic batch control if you produce goods in batches.
• Identifying the cheapest and fastest suppliers.
• Bar coding systems which speed up processing and recording. The software will print and read bar codes from your computer.
• Radio Frequency Identification (RFID) which enables individual products or components to be tracked throughout the supply chain. See using RFID for inventory control, stock security and quality management.

A computerised stock control system will only be as good as the data put into it. Run a thorough stocktake before it goes 'live' to ensure accurate figures. It's a good idea to run the previous system alongside the new one for a while, giving you a back-up and enabling you to check the new system and sort out any problems.

Choose a stock control system

There are many software systems available. Talk to others in your line of business about the software they use, or for impartial advice.

Make a checklist of your requirements. For example, your needs might include:

• multiple prices for items
• prices in different currencies
• automatic updating, selecting groups of items to update, single-item updating
• using more than one warehouse
• ability to adapt to your changing needs
• quality control and batch tracking
• integration with other packages
• multiple users at the same time

Avoid choosing software that's too complicated for your needs as it will be a waste of time and money.

Keeping stock secure depends on knowing what you have, where it is located and how much it is worth - so good records are essential. Portable stock that does not feature the business' logo or is easy to sell is at risk.

Thieves and shoplifters

A thief coming in from outside is an obvious threat. Check the security around your premises to keep the risk to a minimum. In a shop, thieves may steal in groups - some providing a distraction while others take goods. Teach your staff to be alert and to recognise behaviour like this. Set a clear policy and ensure staff are trained in dealing with thieves.

Offering to help a customer if you are suspicious will often prevent a theft. Avoid using confrontational words like 'steal' if you have to approach a suspected thief, and avoid getting into a dangerous situation.

Protect your stock

• Identify and mark expensive portable equipment (such as computers). If possible, valuable stock should be fitted with security tags - such as Radio Frequency Identification tags - which will sound an alarm if they are moved.
• Don't leave equipment hanging around after delivery. Put it away in a secure place, record it and clear up packaging. It is a good idea to dispose of packaging securely - leaving boxes in view could be an advertisement to thieves.
• Carry out regular stocktakes.
• Put CCTVs in car parks and other key locations.

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Theft by staff

Theft by employees can sometimes be a problem. To prevent this:

• Train staff about your security systems and your disciplinary policies and procedures. Training about the cost of stock theft will help, as many people aren't aware of the implications for company turnover and job security.
• Set up procedures to prevent theft. Staff with financial responsibilities should not be in charge of stock records.
• Restrict access to warehouses, stockrooms and stationery cupboards.
• Regularly change staff controlling stock to avoid collusion or bad practice.

Find out more in security and crime prevention.

There are many administrative tasks associated with stock control. Depending on the size and complexity of your business, they may be done as part of an administrator's duties, or by a dedicated stock controller.

For security reasons, it's good practice to have different staff responsible for finance than those responsible for stock.

Typical paperwork to be processed includes:

• delivery and supplier notes for incoming goods
• purchase orders, receipts and credit notes
• returns notes
• requisitions and issue notes for outgoing goods

Stock can tie up a large slice of your business capital, so accurate information about stock levels and values is essential for your company's accounting.

Figures should be checked systematically, either through a regular audit of stock - stocktaking - or an ongoing programme of checking stock - rolling stocktake.

If the figures don't add up, you need to investigate as there could be stock security problems or a failure in the system.

Health and safety

Health and safety aspects of stock control are related to the nature of the stock itself. Issues such as where and how items are stored, how they are moved and who moves them might be significant - depending on what they are.

You might have hazardous materials on your premises, goods that deteriorate with time or items that are very heavy or awkward to move.

Find more information on storing goods and materials.

Quality control is a vital aspect of stock control - especially as it may affect the safety of customers or the quality of the finished product.

Efficient stock control should incorporate stock tracking and batch tracking. This means tracing a particular item backwards or forwards from source to finished product, and identifying the other items in the batch.

Goods should be checked systematically for quality, faults identified and the affected batch weeded out. This will allow you to raise any problems with your supplier and at the same time demonstrate the safety and quality of your product.

This kind of tracking is relatively straightforward with a good computerised stock control system. Manual stock control methods can also use codes to systematise tracking and make it easier to trace particular batches.

Radio Frequency Identification (RFID) can be used to store information about a product or component's manufacturing date, to ensure that it is sold or processed in time. The system can also be used to trace faulty products quickly and efficiently. See using RFID for inventory control, stock security and quality management.

The British Standards Institution (BSI) has a scheme to. Achieving the standard is one way of showing customers and regulators that you take quality control seriously.

The details vary according to the particular business sector. For some industries, certification is a legal requirement.