Mid-Year Inventory Audit: Safeguard Your Cash Flow from Stagnant Stock

 Let’s call it what it is:

Excess inventory silently eats into profits.

It’s not always visible. It’s not always obvious. But when you overlook it, it accumulates discreetly in backrooms, warehouses, or on shelves labeled “to be moved later.”

When you finally realize how much capital is tied up in unsold goods?

The opportunity to rectify has already slipped away.

That’s why mid-year is crucial. It’s an optimal time to thoroughly review your inventory, streamline operations, and develop an intelligent sales strategy—before holiday chaos or unexpected supply chain disruptions occur.

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Why Inventory Management is Paramount in 2025

To be candid: 2025 has posed significant inventory management challenges.

Rising storage costs, tariff ambiguities, port delays, evolving consumer preferences, and leftover “just in case” stockpiles from the previous year mean businesses are stuck with excess inventory and insufficient liquidity.

But here’s the silver lining:
Slow-selling inventory doesn’t have to morph into completely unsellable stock.
Not if you take action promptly.

Mid-Year Inventory Audit Guide 

1. Conduct a Physical Inventory Count

Indeed, a physical count is essential.

This means verifying actual inventory against system records. What’s truly on the shelves? Not theoretically present stock.

The Significance: If your databases indicate 25 units but only 2 are present, your ordering decisions are already flawed. It’s critical for receiving a true inventory picture—and avoiding misguided planning.

2. Generate a Sales Velocity Report

Which products are in demand? Which are stagnating (for weeks or even months)?

A straightforward sales velocity analysis identifies slow-moving items—typically, products untouched for 90 to 180 days. Use this as your benchmark.

Simplified: Items unsold for three to six months are not merely “inventory”—they constitute unnecessary overhead.

3. Realize the Occult Costs of Inventory Holding

Slow-moving stock not just locks your cash flow but also:

  • Consumes valuable warehouse capacity

  • Inflates insurance and storage expenditures

  • Enhances the risks of theft, spoilage, or becoming obsolete

  • Impairs your ability to stock higher-margin products 

The longer unsold inventory is retained, the higher its cost—even if it's considered “paid for.”

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4. Isolate the Truly Stagnant Stock

What has expired, become outdated, off-season, or hasn’t ever appealed to customers?

Inventory that has weathered multiple sales cycles yet remains unsold should be promptly discarded.

Principle: Items unsold for over six months, non-seasonal, should be highlighted. Even if you favor it, your clientele evidently does not.

5. Formulate Strategic Mid-Year Promotions (or Exit Plans)

You don’t need to liquidate everything. Instead:

  • Bundle underperformers with popular products

  • Initiate a flash sale

  • Offer promotions exclusive to VIPs or loyalty rewards

  • Rebrand or reposition unsold items

And if they still don’t sell?

Think about donating (providing potential tax benefits), liquidating, or reusing inventory before further financial drain occurs. 

6. Leverage Learnings for Improved Forecasting

Every unsold item narrates a tale. A passing trend, demand shifts, or misjudged supplier recommendations?

Utilize these learnings to refine your purchasing tactics and projections for Q3 and Q4:

  • Align orders with actual demand

  • Mitigate excess stock risk

  • Enhance liquidity

  • Prioritize current sellers over potentials

Bonus: Track Your Inventory Turnover Ratio

For data enthusiasts, monitor the frequency of sales and restocks annually.

Low turnover signifies capital tied in stock.
High turnover signals improved liquidity, better margins, and reduced waste.

Even preliminary insights into fast-moving products aid in smarter purchasing and promotional cycles.

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Conclusion: Command Over Your Inventory

Direct your inventory instead of letting it dictate your operations.

Whether managing a storefront, dispatching from a garage, or overseeing several warehouses, now is the time to clarify what drives growth—and what holds you back.

December is too late to resolve issues emerging in July.

Seek Expertise in Inventory Analysis?

Our focus is to support business proprietors in evaluating inventory performance, identifying financial prospects, and crafting strategic plans for sustained profitability.

Let’s strategize your inventory optimization.

Contact our office now.

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