Free inventory turnover calculator

It shows how many times you sell through your average stock during a period. You work it out by dividing your cost of goods sold by your average stock value. If you sold stock that cost 600,000 and you held an average of 120,000 on the shelves, your turnover is 5. In plain terms, you sold and replaced your stock about five times.

It is the average number of days an item sits on your shelves before it sells, also called days inventory outstanding. You work it out by dividing the days in the period by your turnover. A turnover of 5 over a year means 365 ÷ 5 = 73 days. It is the same information as turnover, said in days, which many people find easier to picture.

There is no single good number. It depends on what you sell: fresh food turns over fast, furniture and jewellery turn slowly. A better question is whether your own number is moving in the right direction, and how it compares with similar businesses. A very low turnover means cash is stuck on your shelves. A very high one can mean you often run out of stock, so it is worth checking your reorder points.

Add your stock at the start of the period to everything you bought during it, then subtract your stock at the end. If you began with 2,500 of stock, bought 3,000 more and finished with 2,800, then 2,500 + 3,000 − 2,800 = 2,700 is the cost of what you sold. Our calculator does this for you if you choose "Work it out from purchases". We explain it in how to calculate the value of your stock.

Use cost for everything: the stock values and the cost of goods sold. Mixing the two gives a wrong answer. Your stock value calculator shows the value of stock at cost.

Your stock goes up and down during a period, so one snapshot can mislead. The average of the start and end smooths that out. If your stock changes a lot during the period, for example around a busy season, try a shorter period such as a month, or compare several months.

• Find what isn't moving. Slow sellers hold the most cash for the least return.
• Order smaller amounts more often, where your supplier allows it.
• Reorder by the numbers. A reorder point stops you buying too much or too little.
• Clear what's left. A discount on stock that won't sell can be better than leaving it to sit.

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