How much working capital is sitting on your shelves?
Every unit on your shelf is cash you’ve already spent and haven’t earned back yet. That’s fine when stock turns quickly. It’s a quiet crisis when it doesn’t — money trapped in product nobody is buying, money you can’t use for rent, payroll or the stock that does sell. Here’s how to see the number and shrink it.
Step 1: Value what you’re holding
Add up the cost (not retail price) of every item in stock. This is your inventory’s carrying value — the cash currently parked on your shelves. If you’ve never totalled it, the figure is usually bigger than owners expect.
Step 2: See how fast it turns
Inventory turnover = cost of goods sold ÷ average inventory value. A turnover of 6 means you cycle through your stock six times a year; a turnover of 1 means a year’s worth is sitting there at any moment. Low turnover = more cash trapped for longer. This is one of the core numbers in inventory KPIs that actually matter.
Step 3: Find the dead stock
Averages hide the real problem. Sort items by how long since they last moved. The ones that haven’t sold in 90, 180, 365 days are your dead stock — and they’re where most of your trapped cash lives. You can only do this if you’re recording every movement, which is exactly why transaction history matters more than a single count.
Step 4: Free the cash
- Discount or bundle slow movers — even at a loss, recovered cash beats a frozen shelf.
- Stop reordering anything below a healthy turnover until it clears.
- Right-size reorder points so you stop refilling stock faster than it sells. See setting reorder points.
- Return or liquidate the truly stuck items and take the lesson into your next buy.
Keep it from creeping back
Dead stock accumulates when nobody’s watching. Review turnover quarterly and let reconciliation snapshots give you point-in-time carrying values you can compare over time. The goal isn’t the lowest possible stock — it’s the least cash trapped for the service level you need.