Most people who aren’t familiar with the ebbs and flows of retail inventory assume that inventory is always an asset. After all, it’s made up of goods that you’ve purchased with real capital in order to sell for a profit. And while that’s certainly the way retailers want to look at their inventory, it doesn’t quite give the full picture.
There are times when inventory can become a liability. When this happens, it’s important to move that inventory out of your warehouses and stockrooms as quickly as possible, while still getting a fair market price for it. Why does this happen and what can you do about it? Read on to find out.
What Is Inventory Liability?
If you’re new to inventory management, you may not be familiar with the concept of inventory liability. Even some who have been managing retail for years may not have encountered the problem. But sooner or later, all businesses who carry inventory have to face this challenge.
In an accounting sense, inventory is always an asset in that it’s something you own rather than something you owe. But in another sense, inventory becomes a liability when it becomes a disadvantage to your business. There are a few reasons this may happen.
1. When You Have Too Much Money Tied Up
Overbuying is a common mistake in inventory management and it can cause serious problems for a business. When you have too much capital tied up in inventory, it may be difficult to afford other costs such as paying vendors or utilities or even making payroll. Even if you still have enough cash flow to pay your bills, you may be unable to invest in marketing, purchase the latest products, or take advantage of opportunities that come your way.
2. When It’s Becoming a Problem to Store
If you’re selling small items, this is unlikely to become an issue, but the cost of storage can mount quickly for those stocking larger products. When you find you’re having to procure more and more warehouse space to store products that aren’t moving fast enough, you have a problem. When you have to spend hours moving things around to get to the inventory in the back of the warehouse, you have a problem. Remember, too much clutter cuts down on efficiency in your warehouse, which in turn costs you money in payroll hours and can lead to poor customer experiences.
3. When Customer Returns Pile Up
If you don’t currently have a system to deal with customer returns, they may be piling up in your storeroom, causing an inventory clog. When products are not in new condition, you don’t want to put them on your sales floor. At the same time, tossing them in the dumpster is bad for the environment and your bottom line. You need a better solution to offload returns, make some money from them, and keep your brand’s reputation intact.
4. When It’s Depreciating Too Fast
If you tend to purchase inventory in huge quantities and then store it for months, you’re likely to run into this problem. Consumer tastes change, there’s seasonality to contend with, and sometimes products go out of fashion quickly and with little warning. In other cases, a newer version of a product comes out, making the old one obsolete. Whatever the reason, inventory that is no longer worth what it was is a problem that you need to solve quickly before the value falls even further.
Inventory Liquidation Is the Answer
Whenever you have an excess of inventory that’s causing problems for your business, the worst thing you can do is ignore the problem. You need to find a way to quickly move out a large number of products, without spending a lot of money or time.
Inventory liquidation auctions from B-Stock are the best way to efficiently move excess inventory and get the best return for it. Here’s how it works:
- Auction lots of your inventory get listed. This could be a pallet, several pallets, or full truckloads of excess inventory.
- Our network of fully-vetted excess inventory buyers compete to win your auction lot.
- The auction winner pays and arranges for transportation of goods.
- You get paid the best price that the market will support while offloading large quantities of excess inventory quickly.
B-Stock has been in the liquidations business long enough to become experts on how to get the most out of every inventory lot. Our inventory specialists will provide you with auction strategy, create auction lot listings, and get you cash in hand fast allowing you to clear out that extra product and get your business back on track.
Want to learn more about selling with B-Stock? Request a demo today and learn how our liquidation auctions can benefit your business.
Source: https://bstock.com/blog/tips-for-companies-to-limit-inventory-liability/
