4 Reasons to Liquidate Excess Inventory
Excess Inventory = Higher Overhead Costs
Excess inventory is something that every company must deal with at some point during their operations. It can be hard to predict how much of a product to produce to meet fluctuating demands and assess the amount of equipment needed for production. Unfortunately, when a company finds themselves with excess inventory it typically has a negative impact on their balance sheet. It can be hard to think about selling off products or equipment that may have the potential to be used in the future, but the overhead cost of keeping them can far outweigh any possible future benefit.
When a company has excess inventory, it is typically being stored alongside other inventory or equipment assets. This space could instead be used to store larger quantities of a product that has a higher turnover in order to bring in more revenue. Additionally, another piece of equipment could take the unproductive asset’s place in order to increase production of another product. Storing excess inventory in a space that could be profitable is a huge waste for any company.
Unnecessary Maintenance Costs
If a company is still holding onto inventory it is likely planning on using it or selling it to a consumer at some point in the future. If this is true, then the inventory should be receiving regular maintenance such as cleaning and inspections. This can be expensive, as a company will have to pay an employee to perform the maintenance in addition to buying any necessary supplies. If you decide to liquidate your inventory, you no longer have to worry about those wasted expenses and have can have employees working toward productive tasks.
Besides the stated costs of wasted space and employee time, a company will get hit with additional taxes. While these costs can go easily unnoticed, it is
important to consider that you are paying real estate taxes on any unproductive space, as well as any payroll taxes for the employees maintaining the inventory. Idle inventory is not something that you want to waste tax dollars on, so it would be much more beneficial to sell it and free up the space.
Higher Insurance Costs
The more assets that your company has the more your insurance will be. Even if a piece of heavy equipment is just sitting in storage your company will have to pay insurance on it. If you were to sell off unneeded assets, you wouldn’t have to have the additional insurance and your tax rates could be lower.
Holding onto excess inventory is extremely unproductive and costly for any company. Selling it off is a fantastic way to cut unnecessary expenses and obtain some extra resources to reinvest in your company. Regardless if that looks like upgrading other equipment or funding a new project, you will definitely be able to find a great use for the cash. Interested in selling off some excess inventory? Consider holding an auction with us here at Repocast.com! We work with businesses and financial institutions sell off unneeded assets at the highest prices possible. Contact us today for more information.