Business readiness

Aged Inventory Report

What is an Aged Inventory Report?

An aged inventory report, also known as an aged stock report or inventory aging report, is a financial document that provides key metrics about the status of your inventory and in particular:

  • How long each item of inventory typically spends in storage before being sold or utilized
  • The storage and other quality maintenance costs incurred during the time goods are held in inventory
  • The inventory management approach used for each item type
  • It may also include the source of each item including the delivery scheduling information

Why is an Aged Inventory Report important for business today?

Having an aged inventory report provides better informed decision making by senior management by providing additional insight into which stock moves at what speed and this gives a number of benefits for your business today:

  • Helps you understand how long your products spend in inventory and compare performance against industry benchmarks
  • Allows you to focus your attention on the slowest moving items
  • Improves decision making on the timing and quantity of inventory purchases or production
  • Provides an analysis of the costs of maintaining the quality of assets held in storage

Why is it important for an event tomorrow?

Potential investors will also be keen to see analysis of your business’ inventory for them to understand:

  • How the inventory control system compares to either their own company or other similar companies in the same industry
  • Whether any improvements can be made in inventory management to reduce the time goods spend in storage
  • Whether the costs incurred during storage to maintain the quality of the goods can be improved
  • Whether particular products are slower than others in terms of time spent in inventory and whether the product mix can be adjusted
  • Whether the delivery arrangements of particular suppliers have an impact on the time spent in inventory, for example delivery schedules and volume requirements

Improvements in these metrics will ultimately improve cash flow of the business resulting in both an increased valuation and an improved ability to service existing or new debt arrangements.

Pros of addressing Aged Inventory Report

  • Assesses product time spent in inventory
  • Focuses attention on slowest items
  • Improves decision making on inventory purchases
  • Assesses the costs of maintaining inventory quality

Cons of not addressing this topic

  • Less insight into inventory costs
  • Unable to know which products move slowest through the inventory process
  • Unable to know which products are costing the most in inventory costs
  • Greater costs to maintain inventory quality

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