What is inventory turnover?

Use the cost of what you sold, not the selling price, so both numbers are at cost. Average inventory is usually the stock value at the start of the year plus the end, divided by two.

A shop sold goods that cost it $60,000 over the year. Its stock was worth $14,000 at the start and $16,000 at the end, so the average is $15,000.

• Turnover: 60,000 / 15,000 = 4 times a year
• Average time to sell stock: 365 / 4 = about 91 days

If the owner lifts sales without adding stock, so cost of goods sold is $75,000 on the same $15,000, turnover rises to 5 and stock lasts about 73 days. The same stock does more work.

There is no single good number. A grocery that sells fresh and fast moving goods turns stock far more often than a hardware or furniture shop. Compare against your own past figures and against similar shops, not against a different kind of business.

• Too low means overstock or dead stock is holding cash.
• Too high can mean you run short often and lose sales to stock-outs.
• Measure per category. One average hides the fast sellers and the stuck lines.

The inventory turnover calculator does the sums, and the guide explains how to improve it.

Shopkeepa reports inventory value and gross profit where cost is known, and lists best sellers and slow movers. Those are the inputs for a turnover figure.