Inventory Turnover Report
For a streamlined inventory, it is not efficient to have large quantities of inventory sitting idle on your shelves. To maximize the efficiency of your stock, you need to know how quickly each product moves through inventory.
The Inventory Turnover Report helps you assess stock level changes over time. This report lists the cost of sales, average value, turnover rate (or turn rate) and average days on hand for each inventory item. This data is based on the time period shown in the footer of the report.
Inventory turnover measures item efficiency by examining how quickly you sell a product. Turnover is based on the number of times stock is turned over, or replaced, during a certain period.
The turnover rate is measured as cost of sales divided by the average inventory value, or:
[Cost of Sales / Average Inventory Value] = Inventory Turnover Rate
For example, the annual cost of sales for item AB123 is $1000 per year.
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If the average inventory value is $1000, then the turnover rate is 1. (1000 / 1000)
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If the average inventory value is $250, then the turnover rate is 4. (1000 / 250)
The average inventory value is calculated as follows:
Average Inventory Value =
[SUM (on hand value on the last day of each month) / # of months in period]
Use data on this report to make decisions about your inventory management. For example, compare the current year turnover rate of an item with the previous year turnover rate.
A turnover rate increase may indicate stock is not ordered often enough, or may indicate an increase in demand. Top-selling items move through inventory faster and have a higher turn rate.
A low turnover rate means the item is not moving through inventory quickly. A turnover rate decrease may indicate that too much stock is being ordered and kept on hand. It could also indicate poor sales.
After you identify an item with poor turnover, you could increase the turn rate and efficiency of this item. Decrease the amount you order from the vendor each time. Purchasing stock in lower quantities at more frequent intervals benefits you in several ways:
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It decreases the funds you have tied up in idle stock.
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It enables you to use revenue generated from sales of the product to replenish stock.
The Inventory Turnover Report also shows the average days on hand for items. This provides an idea of how long it takes to run out of each item during the period specified. Average days on hand is calculated as [# of days in month(s) of selected date range / inventory turnover rate].
To see an inventory turnover report:
Go to Reports > Inventory/Items > Inventory Turnover.
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This report does not support reporting by period even when the Report by Period preference is set to All Reports. The Report by Period preference can be configured at Home > Set Preferences, on the Analytics subtab.