How to handle expired stock in a small shop

Expired stock is cash you spent that has turned into rubbish. In most shops it comes from the same few causes.

• Over-ordering. You bought a case because the price was good, and sold three units.
• Wrong rotation. New stock was put in front, so the older units sat at the back.
• No one checking dates. Dates were read at delivery and never again.
• Slow sellers with short life. Some products simply do not sell fast enough for their shelf life.
• Short-dated deliveries. The supplier sent stock with a date too close to sell.

Each has a fix. Better ordering is the most powerful, because stock you never buy never expires. See how to set reorder points to size your orders properly.

First in, first out (FIFO) means you sell the oldest stock first. On the shelf, that means older units go at the front and new ones go behind. It sounds obvious, and it is the single most effective habit for reducing expired stock.

1. At delivery

   Check the date on the new stock. If it is shorter than the units already on the shelf, flag it. See how to check in a delivery.

2. Pull the old stock forward

   Take everything off the shelf, put the new units at the back, and place the old ones in front.

3. Keep a clear rule for staff

   Teach every new person: front first, behind is new. Put it in your cashier training.

4. Mark a clear spot

   Use a shelf strip or a tray for the products closest to their date, so anyone can see them.

FIFO also matters for the way you cost stock, which is covered in inventory valuation methods. The shelf rule and the accounting rule are different things, though. Rotate by date on the shelf whichever costing method you use.

Do not rely on noticing. Put date checks on a calendar. How often depends on how short the shelf life is.

Pick a fixed day for each group so the check is a habit, not a mood. Walk the shelf, turn the pack, read the date, pull anything past or near it. Record what you pull.

A discounted sale beats a write-off. If you will not sell all the units at full price before the date, a markdown recovers some cash. The question is when and how much.

A simple rule is to mark down when the remaining shelf life is shorter than the time it takes to sell what is left. If you sell 4 yogurts a day and have 20 that expire in 3 days, you will sell about 12 at full price and be left with 8. Mark the extra 8 down now, not on the last day.

Worked example. Yogurt costs $0.80 and sells at $1.40. Eight units will otherwise expire.

Even at a price that looks low, you come out ahead of doing nothing. The key is to start the markdown while there is still time for customers to buy and use the product. Make the markdown obvious with a bright sticker. See how to price products for working out the lowest price that still makes sense.

Do not use markdowns on products past the date. The markdown is for products still safely in date.

Some suppliers will credit or swap short-dated or expired stock. Many will not. Ask before you assume.

• Ask at the time you set up the account: what is your policy on short-dated goods, and how many days before the date will you take them back?
• Note the supplier's rules in your own file. Verbal promises disappear.
• Ask for a minimum remaining shelf life on delivery for fresh lines, such as at least two thirds of the total.
• Return promptly. Credits often have a window.
• Keep the paperwork: the product, the date, the quantity, the credit note.

For suppliers who will not take returns, adjust what you order. A product that cannot be returned should be bought in smaller amounts. See negotiating with suppliers for what to ask for.

When you throw something out, write it down. If you do not, your stock count says the item is still on the shelf, and your next count will show a mystery gap. You will then blame theft or counting errors, when the cause was a date.

Record, for each write-off: the product, how many units, the date, and the reason. Call it expired, not damaged, not lost. Separating the reasons shows you what is really going wrong. If expired is your biggest number, work on ordering. If damaged is, work on handling. If loss is, see how to reduce stock loss.

Also keep the value. If you wrote off 8 yogurts at $0.80 cost, that is $6.40. Add these up at the end of each month. A total of $60 a month on expired goods is $720 a year of profit you did not keep, and a good reason to buy smaller amounts.

Note that recording a write-off is not the same as tracking expiry dates for every product in advance. Shopkeepa records "expired" as a reason when you remove stock, so it appears in your stock history and reports. It does not store or track expiry dates, so keep the date-check routine above.

1. Add up the value written off as expired this month.
2. List the three products with the most expired units.
3. For each, ask: did I over-order, rotate badly, or is it simply a slow seller?
4. Reduce the order size or reorder point for each one.
5. Talk to the supplier about the worst offender.
6. Move the slow ones to a shorter ordering cycle.

Do this for three months and expired losses nearly always fall. Link it with the slow movers review you are already doing.