Efficient inventory management is crucial for streamlined operations. Despite the ideal goal of selling every purchased item, the reality often involves challenges like losses and obsolete inventory that may require write-offs. Our focus is on helping small businesses address issues related to obsolete and excess inventory.
As a platform facilitating inventory funding for small businesses, we aim to support you in effective inventory management, ultimately enhancing your eligibility for funding. Once funded, proper allocation becomes vital, highlighting the continued significance of inventory management. Kickfurther specializes in providing businesses with affordable inventory funding, delivering flexibility and control over working capital. We believe in reshaping the funding landscape to align with the needs of growing businesses and contributing to their success stories. Regardless of preconceived notions about inventory funding, we are dedicated to challenging them and guiding you toward a path of success.
But first, let’s learn more about obsolete inventory, what it is, and how to avoid it.
What is obsolete inventory?
Obsolete inventory is often referred to as excess or dead inventory or stock. Businesses classify inventory as dead if there is a lack of demand and believe they will have difficulty selling it. When inventory becomes obsolete, it ties up cash flow and space, both of which are valuable. Therefore, you will want to find a way to liquidate the inventory, or write it off and get rid of it. In some cases, obsolete inventory may be unsellable, which can leave you with fewer options. In addition to finished goods, raw materials can become obsolete, creating the same obstacles. In some cases, obsolete inventory is the result of poor planning, but there’s also the element of unpredictability.
The likelihood of having obsolete inventory can also be influenced by the industry in which you operate. For example, companies that sell perishable goods face more obsolete inventory than a company that sells plastic ware. As a business owner or manager, you will need to define obsolete inventory for your business and have a system to identify it. By effectively monitoring inventory, you can identify slow-moving products faster and improve forecasting. Both of which can help you maintain healthier inventory management.
Why obsolete inventory is a problem
Obsolete inventory is a problem because it ties up cash flow. Inventory is usually a business’s biggest expense. Holding inventory or raw materials that you cannot sell or turn a profit on can lead to big problems. Whether you choose to donate the inventory and use it as a write-off or liquidate it and take a loss (you can write down the loss), you should find a way to eliminate the obsolete inventory. In addition to cash flow, obsolete inventory takes up valuable space.
Tips to identify and avoid obsolete inventory
The best way to identify and avoid obsolete inventory is to leverage an inventory management system. Most inventory tracking systems offer features such as real-time inventory tracking, automated replenishment, product categorization, and so forth. All of these features and more can help you better manage inventory and identify dead stock. Here are some tips on how to identify and avoid obsolete inventory.
- Invest in an inventory management system with demand forecasting: Historical sales and market trends can help you understand what sells and what volumes you need. With this information, you can make better predictions about future demand and sales, thus allowing you to purchase inventory more accurately.
- Utilize lean manufacturing processes: Lean manufacturing processes focus on minimizing waste, such as dead inventory. You can run more efficient operations by focusing on efficiency and profit margins. You can also take the approach of Just-In-Time production, which entails only restocking goods or producing goods as needed.
- Regularly review inventory levels: Just because you have a sophisticated inventory tracking system does not mean you can manage inventory hands-free. Get involved, continue to find ways to improve reporting, and review inventory levels regularly to ensure the system is doing its job.
- Monitor market trends regularly: As you try to stay one step ahead, it can be challenging to predict the future. Monitoring market trends by leveraging social media interaction, historical sales, emerging trends, and so forth can help you avoid obsolete inventory in the future.
Managing obsolete inventory
Utilizing an effective inventory management system is the best way to manage obsolete inventory. Once you’ve identified obsolete inventory, consider the following methods for getting rid of it.
- Offer discounts for bundling
- Remarket the items to help them sell
- Run sales or promotional pricing
- Find ways to liquidate or donate and write off the inventory
How to prevent obsolete inventory
To prevent obsolete inventory, implement an advanced inventory management system that features demand forecasting. Additionally, perform regular audits of inventory. If you do not have an inventory tracking system in place yet, you will need to find ways to track inventory and demands to the best of your ability. When you’re just starting, it can be challenging to find the cash flow to invest in an inventory management system. However, doing so can save you in the long run while helping you grow faster. If you need working capital or funding for inventory, turn to Kickfurther for affordable funding that puts you in control of the business you’ve worked so hard to create.
Closing thoughts
Product businesses face high inventory costs. Keeping a pulse on what’s in stock, what’s selling, when to restock, and other important factors can help you maintain healthy cash flow and sales. If you have dead inventory, don’t ignore it. Invest time to address it and find ways to reduce or avoid it moving forward. If you opt to use inventory financing, backers or lenders will likely want to review your sales and inventory systems. Investing in advanced and efficient inventory monitoring systems can help you grow your business and secure additional funding, as needed.
How Kickfurther can help
Inventory can tie up cash flow, hence why obsolete inventory should be addressed sooner rather than later. You may need to leverage inventory funding to ensure you are investing in ways to grow your business and not just trying to keep up with inventory demand. Doing so can free up working capital to upgrade inventory systems and hire the right people. And that’s where Kickfurther comes in.
Kickfurther funds up to 100% of your inventory costs on flexible payment terms you customize and control. With Kickfurther, you can fund your entire order(s) each time you need more inventory and put your existing capital to work, growing your business without adding debt or relinquishing equity.
Do you need more reasons to choose Kickfurther?
No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.
Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.
Not a debt: Kickfurther is not a loan, so it does not put debt on your books. Debt financing options can sometimes further constrain your working capital and access to capital, or even lower your business’s valuation if you are looking at venture capital or a sale.
Quick access: You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.
Kickfurther puts you in control of your business while delivering the costliest asset for most CPG brands. With more free cash flow you can allocate more resources toward ensuring inventory is properly managed, thus avoiding obsolete inventory.
