What can a company do in the meantime with slow-moving or obsolete inventory?
Implement a system to identify and eliminate slow-moving or obsolete inventory that is consuming valuable warehouse space along with capital. There is value in slow-moving and obsolete inventory items, but if these items pile up and sit over a period of time, they become worthless. Inventory that isn’t turning or is no longer relevant to a company’s process can sometimes be returned to vendors. Offer special reduced pricing to help turn the inventory quickly. Give sales-people incentives to concentrate their efforts on moving that inventory. Determine if there is a market via the Internet or scrap. Or, donate the items to charity and realize tax advantages (though first discuss this with your tax adviser). Why will banks scrutinize a company’s inventory management before granting loans? Banks want proof that the money they lend a company for inventory investments will provide a good return. If inventory is sitting, it is not paying off debt. A bank will review inventory turns and ask q
