What is Inventory aging report and why organizations should have it?

Inventories and stocks are an imperative part of businesses, and it is crucial to keep a track of them for making better decisions and strategies. Generating accurate and timely inventory aging reports can bring a massive shift in your business growth. When handled properly, inventory aging reports can aid in getting rid of outdated goods which opens up prospects for more sales resulting in satisfied customers. To know better about inventory aging reports, let’s go through the details shared below.

What is an inventory aging report?

An?inventory aging report?or stock aging report represents the key metrics on the status of inventories utilized in the firms. In essence, it is a list of the inventory goods arranged by how long they have been in stock. The aged inventory report is the simplest tool for identifying slow-moving or obsolete inventory that needs to be revalued in order to accurately compute your cost of goods sold. The insights from inventory aging reports enable business owners to predict some of the potential occurrences that could affect the firm in business.

Key takeaways from inventory aging report

Inventory aging reports provide many crucial key takeaways which are significant while handling stocks and inventories in the organization. Following are some of the important key takeaways provided by the inventory aging report.

Inventory aging reports enable us to concentrate on slow-moving objects more effectively:

The inventory aging report shows you which products are slow to move or aren't moving out of inventory at all. This is keen on figuring out why some products remain in stock for a longer period of time than others. The products you order in the future may be affected by this data.

The ability to make decisions regarding the quantity and timing of inventory purchases can be improved by inventory aging reports:

Inventory aging reports enhance the decision-making process for purchasing inventory. With knowledge on which products aren't selling quickly out of stock enables the purchasing department to arrange orders for those that do and thereby removing slow-moving products.

Provides information about supplemental costs:

Non-moving items take up the space which can be utilized for items that sell quickly. Also, long-term product storage along with maintenance charges for the products to remain in saleable condition can be expensive.

Along with these, an inventory aging report helps to understand how long the products are kept in stock. It lets you compare performance to industry benchmarks. Moreover, this report analyzes the costs of preserving the value of assets that are kept in storage.

Advantages of inventory aging report in business

There are many advantages for a firm in monitoring and maintaining a careful eye on outdated inventory. Some of the advantages of an inventory aging report are as follows:

• Get to know how long your products stay in stock and evaluate performance against industry standards.
• It is possible to quickly determine the rate of movement for each inventory with the help of an inventory aging report.
• You can concentrate your attention on the objects that move slowly by knowing when an inventory of each item arrived at the premises and when it arrived at the time.
• Improve the timing and volume of inventory purchases or production decisions.
• Sell used or outdated products at steep discounts to help get rid of them more quickly.
• The expenses incurred for storage and other quality maintenance while the products are kept in inventory can be understood.
• Inventory aging report provides us with information about the goods that consumers are purchasing so that we don't spend a lot of money on goods that won't sell.

Consequences of disregarding aging inventories

Though accounting software for small businesses may not always consist of inventory aging analysis, neglecting aging inventories can create a mess in the organization. Some of the consequences are:

Ineffective inventory management:

Stocks are more prone to obsolescence if no one monitors their age during their life cycle. Additionally, it may lead to inefficient warehouse management, reduced production, and inaccurate inventory balances.

Storage costs are high:

As the inventories get older, more money has to be spent on their storage. Finding slow-moving objects can help free up storage space if inventory aging is examined. Also, with proper inventory aging reports, more room can be made for fast-moving things.

Costs for maintaining quality have gone up:

Without the knowledge provided by inventory aging reports, additional costs are unavoidable in order to guarantee a superior client experience. These expenses are associated with the money spent on repairs, resolving customer complaints, and warranty claims.

Inventory write-off losses:

Stocks or inventories cannot be held indefinitely as they must be recorded as an expense on your balance sheet eventually. Representing the loss on inventory and how it affected the net income is a necessary step. An inventory aging report can be utilized to help in dealing with these issues.

The bottom line

An Inventory aging report can be prepared with the help of effective accounting software as there is a high possibility for error while handling them manually. With a cloud-based online accounting software like Accoxi, all the inventory management, aging analysis, and accounting tasks can be handled easily and effectively.

If you are looking for an effective accounting software that can help in tracking inventories, generating reports, and handling your accounting tasks smoothly, get to know?Accoxi?today. Connect with us and get a free trial on Accoxi.