Ceiba Accounting Services

Mid-Year Inventory Audit: Prevent Profit Leaks

Let's face a tough truth:

Dead stock silently erodes your profits.

It's not always evident, and you might not feel its impact immediately. Yet, ignoring it can lead to a pileup of unsold goods accumulating in your warehouse, storage room, or the infamous "we'll sell it eventually" shelf.

By the time you recognize the financial burden of dead stock, you may have lost the chance to remediate.

Now is the time—the middle of the year provides the ideal opportunity to scrutinize your inventory, recalibrate your sales strategies, and prepare before the holiday rush or unexpected supply chain disruptions.

The 2025 Inventory Challenge

Let's be candid: 2025 is presenting new hurdles for inventory management.

Rising holding costs, tariff ambiguities, port backlogs, evolving consumer preferences, and the lingering effects of last year's "just in case" stockpiling have left many businesses overstocked and cash-strapped.

However, there's a silver lining:
Proactive management can turn slow-moving stock into an asset rather than a liability. The key is early intervention.

Your Mid-Year Inventory Audit Checklist

1. Conduct a Physical Inventory Count

Yes, a physical count.

Comparing actual stock on hand to system records keeps purchasing decisions accurate, rectifies discrepancies, and prevents decisions based on erroneous data.

2. Generate a Sales Velocity Report

Determine which stocks are moving swiftly and which have stagnated for extended periods.

Use sales velocity data to identify slow-moving inventory, typically items unsold for 90 to 180 days—time to consider them as overhead.

3. Baseline the Costs of Inventory

Slow inventory is more than a cash flow concern:

  • Consumes valuable warehouse space
  • Increases insurance and holding expenses
  • Elevates risks of theft, damage, or obsolescence
  • Delays the stocking of higher-margin items

Holding onto unsold goods drains resources even after recouping their direct costs.

4. Identify What Truly Is Dead Stock

Recognize stock that has expired, become irrelevant, or never caught consumer interest.

Inventory untouched through multiple cycles without sales must be considered for write-off.

Rule of thumb: Items unsold for 6+ months, not tied to seasonality, merit reevaluation.

5. Formulate Strategic Promotions or Exit Plans

Resist the urge for indiscriminate clearance sales. Instead:

  • Pair slow movers with top-sellers
  • Initiate a time-sensitive flash sale
  • Offer exclusive deals to loyal customers
  • Repackage or reposition unsold stock

Unmoved items could also be donated (and may offer tax benefits), liquidated, or repurposed before they incur further losses.

6. Leverage Insights for Better Forecasting

Each stagnant item narrates a story. Was it a passing trend, or did consumer needs evolve?

Apply these insights to refine purchasing strategies and forecasting approaches for the latter half of 2025:

  • Align orders more closely with demand
  • Mitigate surplus stock risks
  • Enhance cash flow management
  • Focus on products with proven sales potential

Bonus Tip: Track Inventory Turnover

Tracking turnover rates enlightens on cash flow efficiencies. Elevated turnover reflects better margins and reduced wastage.

Understanding what sells swiftly facilitates optimized restocking and promotion planning.

Final Thought: Command Your Inventory

Regain control over your inventory management.

Regardless of your operational scale, seize this opportunity to diagnose what's effective and what requires overhaul.

Delaying these actions until the end-of-year rush is too late to address issues that originated mid-year.

Need expert insight into your inventory strategy?

We specialize in helping business owners like you evaluate inventory dynamics, pinpoint financial prospects, and formulate year-long profitability strategies.

Let's optimize your inventory's efficiency.

Reach out to us today.

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