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An inventory aging report, also known as an aged inventory report or a stock aging report, shows how rapidly your inventory is moving. It’s just a list of all the things on hand, sorted by the amount of time they’ve been in stock. It may help you detect slow-moving inventory as well as the added expenditures of storing and maintaining these items until they’re sold. You may either produce a report or manually compute the data, depending on your accounting program.
Inventory Aging Report Example
The Inventory Aging Report Example shown below reveals key financial data that can be used to evaluate the overall financial health of your business.
An inventory aging report created in Odoo looks like this:
Inventory Aging Report Example generated in Odoo
Each product is displayed on the left, along with the number of units in inventory, which is categorized in 30-day intervals. According to this report, as of December 5, 2015, all inventory goods have been in stock for fewer than 30 days, as stated in the first column.
The Inventory Aging Report: How to Read It
With columns for aging “buckets,” such as one to 30 days or 30 to 60 days, an inventory aging report may resemble the more widely used accounts receivable (A/R) aging report. Details like the style or item number, warehouse, quantity, pending transactions, and availability to sell may be included.
Examine each age bucket in the report to see how much it adds to your overall stock on hand. The majority of your stock should be in the first two buckets or less than six months. This indicates that you have more new products than old stock and that the majority of your inventory is selling at full price or with larger margins. You can see that all of the stock in the example report is in the 0 to 30-day age buckets. You may also look at older buckets to determine how much they contribute to your stock mix and utilize that information to manage your aging inventory.
The Inventory Aging Report: How to Use It
An inventory aging report, when used correctly, maybe a valuable indication of your company’s financial health. It may assist you in predicting possible cash flow problems and lowering financial risk. Rather than concentrating on available quantities, the inventory aging report assists you in focusing on dollars spent, return on investment, and the opportunity cost of storing too much inventory.
Creating a Report on Inventory Aging
You may now view two inventory reports that indicate the value of inventory goods in stock, grouped depending on their age since purchase or acquisition, starting with QuickBooks Enterprise Platinum Edition 2021. Inventory Aging Summary and Inventory Aging Detail reports give information on each inventory or assembly item’s age, acquisition value, quantity, and average days in stock.
While the inventory aging report isn’t widespread in small-business accounting software, it’s prevalent in accounting software for mid-to-large-sized organizations. Odoo and IBM, for example, enable you to create an inventory aging report.
Below is an Inventory Aging Report Example generated in IBM:
Inventory Aging Report Example Generated in IBM
On the left, the product line, product description, and product class are all developed using IBM software. In contrast to the Odoo report, this report divides inventory items into four categories: inventory age less than one month, inventory age more than one month, inventory age more than two months, and inventory age unknown. “Unknown” signifies that the receipt date was never recorded, hence the age of the inventory for those products cannot be estimated.
Why Is Inventory Aging Important?
It’s critical to keep track of the age of items in your inventory. Inventory is one of, if not the most important, assets you’ll have on your books. As a result, it’s critical to keep track of how much inventory is on the shelf and how long it’s been there. This will allow you to see what things people are purchasing so that you don’t waste money on items that will never sell.
Businesses may use the inventory aging report to learn things like:
- Detecting slow-moving objects
- Non-moving things are highlighted.
- Knowing how long your items are in stock can help you make better decisions.
- Calculating the cost of keeping goods on hand for lengthy periods of time
Having this type of information at your disposal helps you to make well-informed judgments about what and how many things to buy.
How to Make Your Inventory Aging Report Better
You may reduce the age of your inventory in a variety of methods, but they all begin with increasing your inventory turnover ratio. Your inventory aging report will improve if you can shorten the time it takes for an inventory item to transform into a sale. Your inventory and buying divisions must collaborate in order for this to happen.
To figure out which things aren’t moving, the inventory department has to look at the inventory aging data. After you’ve discovered these things, you’ll need to dig further to figure out why they haven’t sold. It’s possible that you’re ordering too much product, resulting in surplus inventory on the shelf. If this is the case, lower your order for those goods and talk with sales to ensure that you purchase products that will move rapidly to fulfill consumer demand.
The Inventory Aging Report’s Key Takeaways
There are several Inventory Aging Report’s Key Takeaways. First, it identifies slow-moving products and products that don’t move at all. Second, it gives the purchasing department the data they need to make better decisions when ordering products. Third, it gives you key insight into the additional inventory costs you pay for products that don’t sell quickly.
- Slow-moving and non-moving items are identified: The inventory aging report shows goods that are sluggish to move or don’t move out of inventory at all, and it may help you figure out why certain products stay in stock longer than others. This information helps in determining what items you should order in the future.
- Increases the accuracy of inventory buying decisions: The buying department may make orders for items that sell rapidly and cut or remove slow-moving products by knowing what products aren’t moving out of inventory.
- Provides insight into additional costs: The longer a product sits in inventory, the more it costs to keep it “sellable.” Long-term storage may be expensive, and non-moving items reduce the amount of space available for fast-moving items.
Conclusion
Now that you know what an inventory aging report is and why it’s essential, you should take the steps required to create one for your company. It will help you keep track of your company’s financial health and make educated choices about what merchandise to buy in the future.
