An inventory aging report groups your units by how long they have been sitting, valued at cost, usually in bands of 0 to 90 days, 91 to 180, 181 to 365, and over a year. It is the earliest reliable signal that a write-down is coming, because inventory that has aged past its sell-through curve almost never recovers. By the time a unit reaches the over-365 band, the decision is not whether to take a loss but how large a loss to take.
Most sellers look at inventory as a single number on the balance sheet. That number tells you how much cash is tied up. The aging report tells you how much of it is still worth what you paid.
Three forces work against old stock and none of them reverse.
Demand decay. A SKU that sold 400 units a month at launch and sells 40 now will not return to 400. The units bought against the original velocity are now sitting against the new one.
Carrying cost accumulation. Storage, capital, insurance, and handling continue every month. A unit that has been held 400 days has absorbed real cost that never appears in its unit value.
Value erosion. Packaging dates, seasonal relevance, model refreshes, and competitor pricing all move against aged stock. What you can sell it for falls while what you paid stays fixed.
Accounting recognizes this. FASB ASC 330-10-35-1B requires inventory measured using a method other than LIFO or the retail inventory method, which includes FIFO and average cost, to be measured at the lower of cost and net realizable value. That standard came from Accounting Standards Update 2015-11, which replaced the older lower of cost or market test. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.
The practical translation: once you can no longer sell a unit for more than cost plus the fees to move it, the balance sheet carrying value is too high and has to come down. Aging tells you which units are approaching that line before they cross it.
Age from receipt date, not purchase order date. The clock starts when the goods became yours and available, not when you ordered them.
Value at landed cost. Freight, duty, and inbound handling included. Aging a report at supplier invoice price understates the exposure by whatever your import costs run.
Break it out by location. Aged stock at a marketplace fulfillment center often carries a long-term storage surcharge that aged stock in your own warehouse does not, which changes the economics of holding it.
Keep FIFO layers intact. Under FIFO the oldest layer relieves first, so if a SKU is still selling, its old layers clear naturally. A report that averages cost across all units loses this and will show old value on a SKU that is actually turning fine.
Sort by value at risk, not by age. 40 units aged 500 days at $3.10 is a $124 problem. 2,900 units aged 200 days at $11.60 is a $33,640 problem. The second one is not on anybody's list because it has not aged as far.
A seller pulls the aging report at quarter end. Total inventory at landed cost is $846,200.
| Band | Units | Value at cost | Share |
|---|---|---|---|
| 0 to 90 days | 61,400 | $558,492 | 66.0% |
| 91 to 180 days | 19,800 | $174,240 | 20.6% |
| 181 to 365 days | 8,100 | $77,760 | 9.2% |
| Over 365 days | 4,200 | $35,708 | 4.2% |
The over-365 band looks small. It is not the problem.
Now pull the trailing 90-day sell-through for the SKUs in the 181 to 365 band. Three SKUs account for $54,900 of that $77,760, and their combined trailing 90-day sales are 340 units against 5,700 units on hand. At current velocity that is roughly 41 months of supply.
Those units will reach the over-365 band next quarter, and the quarter after that they will be a write-down. The aging report saw it two quarters early. What made it visible was joining the age bands to velocity, which is the step most sellers skip.
The write-down math. Take one of the three SKUs: 2,400 units at $9.63 landed cost, or $23,112 on the balance sheet. Current realistic liquidation price is $6.50 per unit. Selling fees and shipping on a liquidation channel run $2.40 per unit. Net realizable value is $4.10 per unit, or $9,840.
The required write-down is $13,272. Recognizing it now puts a real number on the balance sheet and frees the decision. Carrying it at cost for another year adds storage and postpones the same loss, larger.
0 to 90 days. Nothing. This is working inventory.
91 to 180 days. Check velocity against the reorder plan. If a SKU is in this band and still on an open purchase order, that is the moment to reduce or cancel, not later.
181 to 365 days. Act. Options in rough order of value preserved: promotional pricing on the primary channel, bundling with a fast mover to move both, moving units to a secondary channel where the SKU is not price-anchored, and reducing storage cost by consolidating locations. Marketplace channels with a different buyer profile can absorb aged stock at better prices than a liquidator, which is why keeping eBay accounting clean is worth more than it looks when the aged-stock conversation arrives.
Over 365 days. Stop optimizing. Compute net realizable value honestly, take the write-down, and clear the space. The storage and attention these units consume usually exceeds what waiting recovers.
Averaging cost across layers. Destroys the ability to see which units are old.
Excluding units at marketplace fulfillment centers. Those are often the oldest, because they are the least visible.
Reporting age without velocity. Old and selling is fine. New and not selling is a warning. Age alone cannot distinguish them.
Waiting for the annual count. A write-down decision made in December for the year is a tax event, not a management decision. Reviewing the report quarterly makes it a management decision.
Treating the write-down as a book entry only. The units are still in the building, still taking space, still costing storage. Write-down and disposal are separate actions and both have to happen.
Receipt dates preserved per cost layer. Landed cost allocated at receipt so the value in each band is the real value. Stock tracked by location so age can be seen per warehouse. And an aging view that actually exists rather than being rebuilt in a spreadsheet each quarter.
ConnectBooks provides inventory reports by warehouse, by value, and by aging, with FIFO valuation and landed cost allocation, which is the specific combination this analysis needs. Multi-location tracking sits on the Platinum plan, and what each tier covers is on the pricing page, since the number moves with order volume and channel count.
The other half is the velocity data to join against it. Profit and sales reporting at SKU and channel level is what turns an age band into a decision, and both depend on settlements and receipts posted at transaction level rather than reconstructed from summaries.
Pull the aging report quarterly, sorted by value at risk. For every SKU with more than six months of supply on hand, write down what you are going to do about it and by when. Review that list the following quarter.
That takes about ninety minutes a quarter. It is the cheapest early warning available to an inventory business, and it works because the units that are going to become a loss have already told you, months before the write-down lands.
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