January 29, 2022

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How to deal with Inventories with Expiring dates

How to deal with Inventories with Expiring dates
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Inventories are used by entities that sell goods. It is also a term used by manufacturing firms. Generally, they are stocks of goods on the shelf or warehouse of the entity. Inventories don’t last forever, no matter how durable they are. Therefore, a need to manage expiring inventories. In this article, let’s take you through this.

Inventories are usually kept on shelves or in warehouses. For small businesses, inventories may be kept on the shelf, refrigerator, creates, or any other tools available. Retail businesses get inventories by buying in bulk from the manufacturers or wholesalers. Then these inventories are sold after they are in the store or business premises.

The business owner expects that he or she will sell off the inventories before restocking them. However, this is not the case. Many entities keep storing inventories. The reason is to meet demands. Failing to meet demands for a firm’s product is the beginning to an end of it. Someone once told me that if you sell groundnut and anytime a person needs groundnut and it is available in your store, you will start getting more customers.

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For this and other reasons, it is normal to stock inventories. However, it is important to watch out for expiring inventories. If the stock of goods expired on the shelf, it is impossible to sell them. Even though you sell them, you are risking your business reputation. Clients will tag your entity for selling expired goods. That’s if they don’t file a court case against you.

How to manage inventories that are expiring

The best way to manage expiring inventories is not to have expiring products in your shelf, store, or warehouse. If you apply this simple rule, you may not have expiring goods. That’s FIFO! Which means first in first out. Products purchased first, must be the ones that will be sold out first. Thereby reducing the risk of expiring products in your inventories.

However, expiring products are inevitable. At times you may have skipped some products you purchased earlier and they may remain in stock. To resolve this, you should have technology in place to help you track expiring products. Whenever you buy a bulk of a product, you can use an MS Excel sheet to track it. How? By including the expiring date as a column in the spreadsheet and using tags to differentiate the same products bought at different dates. This will help you know when a product is expiring.

Don’t sell expired products. If the goods are almost expiring, sell them at a discount. Or you can sell them with other products in stock. If product B1 is expiring and product B1 sells for 10,000 Naira, for example. You can sell product B1 at a discount. You can say buy one product B1 and get one extra. Another way to do this is to sell product B1 along with product A. If people buy product A, you should encourage the customer to buy product B1 along with it at a reduced price or on credit terms. This is better than selling expiring products or trashing them.

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Another way to do this is to give expiring inventories to charity organizations for free. If they are nonprofit organizations that are recognized by the law of the country. You may give the expiring products as part of your corporate philanthropy. More so, this is a way of avoiding legal tax.

Here, the value of the products you give out to those organizations recognized for tax exemption is deducted from your taxable income. This will reduce the tax liabilities your company will pay for the year. You see, you win in two ways. You don’t allow the profit to expire and treat them as a loss to your entity. At the same time, you are paying lower tax liabilities to the relevant tax authority.

Conclusion

Inventories expiring can be curbed through FIFO, technology, or corporate philanthropy. Whichever way you decide to deal with it is not wrong. As long as you don’t sell expired products or trash them.

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