Dead stock

BY MATTHEW D. MOHR

Businesses which carr y products for resale are often faced with items which, for a variety of reasons, experience an unexpected sales decline. Properly controlled inventor y will insure these “dead” items are eliminated Some enterprises keep this inventor y on hand with hopes of future sales or to tr y to enhance their balance sheets Sometimes on a particular item sales will be revived and product on hand gets sold Generally the product on hand gathers dust and deteriorates, causing it to have nearly no value.

An interesting conversation I had with a business owner involved how she tracked and accounted for her inventory. While reviewing her warehouse stock, which consisted of thousands of items, I pointed out that to get a true inventory value the low sellers needed to be counted right If you have five units showing on your stock report but only four on hand, that’s a big difference especially if they have no saleable value Her reply was, “Oh no, we have to show that stock as fully valued for our bank loan ”

In essence, as the overall inventory moved through her business she collected and overstated the value of slow-