Different Types of Obsolete Inventory

When it comes to dealing with obsolete inventory, the solution isn’t always the same. Every company has some form of inventory that they might be deemed as obsolete. Because of this, it is important to determine why the inventory is considered Obsolete. It is also not usually just one item. Different obsolete inventory might call for different solutions. There are typically three different types of obsolete inventory; inventory that the market doesn’t want, inventory that is truly broken or not sellable, and inventory that is slow moving.


Not Good For The Market

Obsolete inventory can also mean a few different things. One thing this can apply to is inventory the market does not want anymore. Some of the ways to handle this inventory are by trying to repurpose that inventory. Maybe it can be sold to a different customer or industry. Lastly, if it is obsolete because of the market, then maybe you need to try another market. One important step is to always think differently than before.


Broken Or Truly Obsolete

For the inventory that is broken or truly not sellable, it is best to write it off as soon as possible. In simple, writing off obsolete inventory means removing the value of the inventory from the company’s books. It is important to dispose of the inventory as quickly as possible, because of the tax deduction. The tax deduction can only take place once the inventory is truly disposed of and is gone. Not only does this mean you can get your deduction sooner, but it also means you are freeing up space that can be filled with new inventory.


Slow Moving

The other type of inventory that can be considered obsolete, is the inventory that moves very slow. There are a couple of solutions available for this type of inventory. Often times the solution depends on your companies financials. If the company has been at a loss, then maybe it’s time to do some marketing and or have that huge blow out sale. This can create cash. While it may not make as much as it might, it is better than it sitting on the shelf. If the company is not at a loss, then it might make sense to donate or dispose of the inventory for a tax deduction.


Maybe its time to go to that back corner of your warehouse and clean out some of that old or slow moving inventory. If you need any help with how this affects your books or tax liability, then reach out to us from the link below.

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