Inventory aging report
What is an inventory aging report
An inventory aging report is a document that shows how long inventory items have been in stock, usually categorized by age ranges (e.g. 0-30 days, 31-60 days, 61-90 days, etc.). This report helps businesses understand which items have been sitting on their shelves for a long time and may need to be marked down or cleared out to make room for new products. Additionally, it can help identify products that are consistently selling well, so that inventory can be replenished in a timely manner.
Why is it important to a lender
An inventory aging report can be important to a lender because it provides insight into a business's inventory management and turnover. A lender may use this report to assess a company's liquidity, or its ability to turn assets (such as inventory) into cash quickly. A business with a high turnover rate and low inventory aging may be seen as more financially stable and less risky to lend to, as they are able to sell their products efficiently and keep their inventory levels low. On the other hand, a business with a low turnover rate and high inventory aging may be seen as less financially stable and more risky to lend to, as they may struggle to sell their products and may have difficulty managing their inventory levels.
How to prepare an inventory aging report
As a business owner, you can access or prepare an inventory aging report in several ways:
Use accounting software: Many accounting software programs, such as QuickBooks, Xero, and Sage, have built-in inventory management features that allow you to track inventory levels, turnover, and aging. These programs can automatically generate an Inventory Aging Report for you.
Use spreadsheet software: You can use spreadsheet software, such as Microsoft Excel, to create an Inventory Aging Report manually. You will need to input your inventory data and create formulas to calculate the ages of each item.
Hire a professional: You can also hire a professional accountant or bookkeeper to prepare an Inventory Aging Report for you. They will have the necessary knowledge and expertise to accurately prepare the report and provide you with valuable insights.
Use a inventory aging report template: There are a variety of Inventory Aging Report templates available online that you can download and customize for your business.
It's important to note that, regardless of the method you choose, you need to have accurate and up-to-date inventory data to produce an accurate report.