Taking an inventory involves more than counting boxes. You also need to establish what your business owns, check its condition and determine its carrying value. Good preparation prevents double counting and differences that are difficult to explain at year-end.
At a glance
- An inventory provides evidence of the existence and value of a business’s assets and liabilities.
- A physical stocktake checks tangible items; the accounting inventory also covers receivables, payables and other relevant balances.
- A perpetual inventory system still needs checks to confirm that recorded quantities are reliable.
- Count, reconcile, value and document differences before finalising your accounts.
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Why does a Swiss business need an inventory?
Article 958c of the Swiss Code of Obligations requires balance sheet and notes disclosures to be supported by an inventory or other evidence. The aim is to make the accounts verifiable, rather than require every business to conduct the same physical stocktake.
For a retailer, stock is central. For a service business, the focus is more likely to be receivables, unbilled services, equipment and amounts owed.
An inventory also helps identify losses, missing equipment and goods that can no longer be sold. It therefore complements day-to-day stock management (in French).
What types of inventory are there?
| Approach | Purpose |
|---|---|
| Physical stocktake | Count and inspect the goods actually present |
| Perpetual inventory | Record stock movements throughout the year |
| Periodic inventory | Establish stock quantities at specific dates, particularly year-end |
| Fixed asset inventory | Identify equipment, its location and its condition |
These approaches are not mutually exclusive. A perpetual inventory can be checked through a physical count. A fixed asset inventory covers a different category of assets and requires its own supporting records.
Step 1: prepare the stocktake
Set the date, allocate responsibility and define the areas to count. Prepare lists with item codes, descriptions and units: pieces, kilograms, metres or batches. Give everyone the same counting instructions.
Limit stock movements during the count. If movements continue, record them so that deliveries are not counted twice and dispatches are not missed. Distinguish your goods held by third parties from goods belonging to others that you hold on your premises.
Step 2: identify and check the items
Count the relevant raw materials, merchandise, finished goods and work in progress. Identify damaged or old items separately from normal stock.
For fixed assets, check that equipment exists and identify disposals and items scrapped. For receivables and payables, reconcile subsidiary records with the ledger and supporting documents. Check bank balances against statements and cash on hand against a documented count.
A reliable inventory is therefore more than a list of everything you can see on the premises.
Step 3: value the assets correctly
The rules depend on the asset category. For inventories and unbilled services, the Code of Obligations requires a comparison with the relevant realisable value when it falls below cost. You cannot simply choose between purchase cost and market price to improve the reported result.
Example: 100 units cost CHF 20 each, giving a total cost of CHF 2,000. Twenty units are damaged and their estimated net realisable value is only CHF 8 each. The other 80 remain valued at CHF 20. On these assumptions, the total carrying value is CHF 1,760.
For a machine, use its carrying amount after depreciation (in French) and justified adjustments. Do not automatically revalue it to the asking price on a second-hand marketplace.
A fall in value without a stock shortage
The business counts all 100 items. Their original cost is CHF 20 each, or CHF 2,000 in total. However, 20 damaged items are worth only CHF 8 each under the valuation assumptions used. The adjusted value is 80 × 20 + 20 × 8 = CHF 1,760. The write-down of CHF 240 reduces pre-tax business profit and the stock carrying value, without an additional cash payment when the entry is recorded. The inventory sheet should distinguish counted quantity, recorded quantity, unit cost, condition and carrying value. Even when all the goods are present, a valuation adjustment may still be necessary.
Example stock count and valuation sheet
On mobile, scroll the table horizontally to see every column.
| Batch | Recorded quantity | Counted quantity | Condition | Unit cost CHF | Carrying value per unit CHF | Total value CHF |
|---|---|---|---|---|---|---|
| Usable items | 80 | 80 | Normal | 20 | 20 | 1,600 |
| Impaired items | 20 | 20 | Damaged | 20 | 8 | 160 |
| Total | 100 | 100 | 1,760 |
Keep the inspection date, item identification, location and sign-off for the count. The reduced value of CHF 8 needs supporting evidence: it is not a standard discount to apply to every old item.
Step 4: explain inventory differences
Compare physical quantities with the software records. Investigate the cause of any discrepancy: a unit error, an unrecorded receipt, goods in transit, breakage or a duplicate entry.
Do not adjust a difference without an audit trail. Keep the original record, explanation, approval and accounting entry. If a problem recurs, also fix the process that causes it.
Step 5: prepare the year-end inventory file
Retain dated count sheets, the names of the people responsible, valuation methods and evidence supporting adjustments. Reconcile the final total with the balance sheet.
The notes to the financial statements (in French) contain the accounting policies and disclosures needed to understand the accounts; they do not replace the detailed working papers. Our article on year-end closing (in French) explains where the inventory fits into the wider process.
Use a reliable inventory to support your year-end accounts
A useful inventory links the quantities counted, the condition of the assets and their value in the accounts, with evidence that explains any differences. This makes year-end closing easier and gives you a clearer picture of what your business owns and owes. If valuations remain uncertain or your lists do not agree with the ledger, our accounting team can help reconcile the records, make the necessary adjustments and finalise your annual accounts.
Frequently asked questions
Does inventory software remove the need for a stocktake?
No. Computer records can contain errors. Suitable physical checks help establish whether those records are reliable.
Should unsaleable goods be left out of the inventory?
Identify them, account for their value correctly and document any disposal. Ignoring them makes your records less reliable.
Does a business without goods still need an inventory?
It must still substantiate its balances, including bank accounts, receivables, equipment, payables and other relevant items.
Sources and references
Romain Prieur is a Swiss certified public accountant and the founder of Entreprendre.ch. With over ten years of experience in auditing and advising businesses in Switzerland, he helps entrepreneurs with company formation, accounting and taxation.
