Stock management
Slow-moving stock: causes, cost and management
We explain how to spot slow-moving products and decide what to do before you order more.
Slow-moving stock is inventory that sells more slowly than expected. Paying for goods that remain unsold reduces the cash available for other purchases and expenses. The amount recovered depends on whether the business can sell or return the goods, at what price and on what payment terms.
Regular stock reviews help retailers identify these items and decide whether to reduce future orders, change the price or transfer goods to another location. This guide explains what to check and how to calculate the recorded cost of the stock under review.
What causes slow-moving stock?
Common causes include ordering more than customers need, changes in demand, unsuitable pricing and poor product visibility. Damaged goods or incomplete packaging can also reduce sales. Review customer feedback alongside sales records to identify the likely cause.
Seasonal products and spare parts need separate consideration because infrequent sales may be normal for those items. The review period should reflect how the product is usually bought.
How to identify slow-moving stock
We recommend starting with one product category at one location. Count what is physically there, then compare it with the stock record. Separate damaged goods, customer reservations and items already set aside for transfer. A quantity that includes unavailable units will mislead the buying decision.
For each item, bring together its quantity, unit cost, last sale date and recent sales. Use the same review date and sales period throughout. If a record is missing, mark it missing; do not turn an unknown last-sale date into “never sold.”
The last-sale date is one indicator, but it should be considered alongside deliveries, seasonal demand and sales at other branches. A recently replenished product may have a high stock balance even when sales are steady.
How to calculate the cost held in stock
For a basic review, multiply each item's quantity on hand by its recorded unit cost. Add the results to find the total cost of the items under review.
For example, suppose your homewares shop has the following stock on 16 May. We use recorded unit costs and Nigerian naira throughout the example.
| Item | Units on hand | Unit cost | Cost held in stock | Last recorded sale |
|---|---|---|---|---|
| Table lamps | 20 | ₦12,000 | ₦240,000 | 12 March |
| Storage sets | 30 | ₦8,000 | ₦240,000 | 4 May |
| Wall clocks | 10 | ₦12,000 | ₦120,000 | 28 April |
| Total | 60 | Not applicable | ₦600,000 | Not applicable |
The recorded cost of these items totals ₦600,000. The amount recovered through sales will depend on selling prices, demand and collection of payment. The lamps have the oldest last-sale date, so the shop could review them first and check whether the other items were recently replenished.
Next, check whether the lamps are visible, complete, working and priced sensibly for current demand. Ask staff what customers say about them. Compare sales at other locations if those records exist. Then decide whether the problem is quantity, presentation, price, condition or demand.
Ways to manage slow-moving stock
- Step 1
Count available stock
Check the physical quantity and reservations.
- Step 2
Check sales and deliveries
Use the same period and include outstanding orders.
- Step 3
Choose the next action
Record the decision, owner and review date.
| What you find | An action to consider | What to check first |
|---|---|---|
| Demand at another branch | Transfer a limited quantity | Receiving branch demand and transport cost |
| Good product, poor visibility | Improve placement or description | A review date and a way to compare sales |
| Price is the obstacle | Test a revised price | Margin, selling costs and likely demand |
| Useful complementary products | Offer a bundle | Combined cost and whether buyers value the pairing |
| Supplier accepts returns | Request return terms | Credit versus cash, fees and deadlines |
| Seasonal demand is approaching | Hold a justified quantity | Expected timing, condition and cash obligations |
Suppose the shop tests a ₦15,000 selling price for eight lamps. If all eight sell and customers pay, receipts would be ₦120,000. Their recorded cost is ₦96,000, leaving ₦24,000 before selling costs, overhead and any applicable tax effects. The remaining twelve lamps still carry ₦144,000 of recorded cost.
Compare the proposed price with expected demand and selling costs before making a change. Include payment terms in the review, since credit sales will delay the cash receipt.
How to avoid excess stock on the next order
Check outstanding purchase orders as well as the shelf. If another ten lamps are already on their way, a second order will add to the problem even if today's stock count is correct.
Compare recent sales with recent deliveries over the same period. This helps distinguish a high balance caused by a new delivery from stock that has remained unsold for several weeks.
Assign a person to review the item and set a date for the decision. For example, the manager could check demand at another branch before approving an additional lamp order. Confirm any change to an existing order with the supplier.
Stock-review checklist
You can use the worksheet below to record your review. It includes:
- Review date, shop and item code.
- Physical quantity, reserved quantity and record difference.
- Unit cost, cost basis and cost held in the reviewed stock.
- Last sale, units sold in the chosen period and recent receipts.
- Condition, seasonality and customer feedback.
- Proposed action, person responsible and next review date.
Summary
Review sales, stock quantities and outstanding orders before buying more of a slow-moving item. Use the recorded cost to understand how much money is committed to that inventory, then choose an action based on demand, condition and likely selling costs. The downloadable worksheet provides a record of the review and follow-up date.