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Running a business

Dealing with Dead Stock

In our last post we looked at determining economic order quantities and reorder points to ensure you have the optimal amount of inventory in stock at any given any time. Economic order quantity lets you minimize inventory costs while matching customer demand, while calculating the reorder points for your products means you’ll always know when it’s time to place a new order, thanks to inventory management software.

Even then, you may find yourself stuck with dead stock. Dead stock are products that haven’t sold a single unit in a year, and footing the inventory costs for these have-beens/never-beens can drain your finances. Moreover, there’s also the opportunity cost of choosing to use your warehouse space to store dead stock instead of your top sellers.

Now, we’d like to introduce some tips on cutting your business free from the burden of dead stock to reduce the financial strain on your business:

1. Discount and bundle it

Try to sell off as much of your dead stock as possible at a discount. This way, you’ll be able to recoup the cost price at the very least.

But trying to sell dead stock by itself can be difficult. After all, these products haven’t been selling for over a year. To really get your dead stock moving, you can bundle your dead stock with more current products and sell these at a discount.

When you’re selling products at a discount, accounting software can automatically add the discount percent or value to your invoices, so you’ll have the records on hand when you need them.

2. Return it to your supplier

Maybe your products are too new to sell at a massive discount midway through the season, but you’re getting the feeling you have a shipment of dead stock on your hands. There’s a market for these items out there, but it’s not yours.

If it’s still current and the return policy allows for it, you may be able to convince your supplier to take back their dead stock. But you’ll be returning your dead stock at a loss, as they’ll charge you a restocking fee of 10% to cover any costs. On top of that, your suppliers are more likely to refund you in credit than cash.

3. Donate it

If you have dead stock that are obsolete but are in still great working condition, you may be able to donate these products to charities. In addition to doing a good deed, you’ll be able to claim a tax write-off for the original value of your stock.

All you have to do is make an agreement with the charity that states that the items were donated for free, and provide signed receipts by the charity and your business.

Ideally, you want to avoid dead stock altogether and that’s where inventory management software comes into play. It’ll let you generate intelligence reports on the performance of different products, so you’ll know which products aren’t selling well and take measures to phase these out from your store.

So stay tuned – we’ll be back next week to tell you all about the wonders intelligence reports can do for your business.

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