Slow Moving Inventory: Find It, Cost It, Book It

Slow moving inventory is stock that still sells, but slower than the pace you bought it for. Non-moving stock has had no sale in your cut-off period. Obsolete (or dead) stock has no realistic buyer at cost. Each needs a different action and a different entry in your books.

The common objection is "it may revive". Test it with three questions. Is there an order or forecast against it? Can you name a likely buyer? Is the product still current? Three "no" answers mean you are holding obsolete stock, not slow stock.

Export every item with its quantity, cost and last sale date, then calculate days since last sale and months of cover. As a starting point (our recommendation), mark an item "non-moving" at more than 90 days without a sale, and "slow" when cover is above six months.

Sort by column E, highest value first, and start with the ten items of highest stock value. In many businesses a small share of items holds most of the value, so check your own total before deciding how far down the list to go.

Set your cut-off from your own business. It should be longer than your supplier lead time plus the normal gap between sales for that item, so a spare part and a fast-selling consumable need different limits. The reorder point formula shows how to work out lead-time demand. For a whole-business view, use inventory turnover days.

Using TallyPrime alongside it. TallyPrime's Stock Ageing Analysis report groups stock into 0 to 45, 45 to 90, 90 to 180 and 180+ day buckets by default. F6 changes the buckets, and F9 changes the ageing style: purchase date, expiry date or manufacturing date (TallyPrime Help). That tells you how long stock has been held. Pair it with last sale date from the Excel sheet, which tells you whether anything is actually moving.

Interest alone on ₹10,00,000 of stock held for a year is ₹1,00,000 at 10%, ₹1,80,000 at 18% and ₹2,80,000 at 28%. Our model is stock value multiplied by your annual borrowing rate. Storage, insurance and shrinkage come on top.

As of May 2026, Shriram Finance quotes working-capital rates of around 8% to 10% for strong MSME (micro, small and medium enterprise) borrowers at public sector banks and 15% to 28% from non-bank finance companies (Shriram Finance). The table uses 10%, the top of the bank range, then 18% and 28% within the non-bank range. These are illustrations; use your own sanctioned rate, or the return you would otherwise earn if you fund stock from your own cash.

At 18%, that stock costs ₹15,000 a month before the rent on the space it sits in. Compare that with the discount needed to clear it, and the case for acting early is usually clear.

Make a provision while the goods are still on your shelves and might sell. Write off when you have decided they have no use and remove them from the books. Ind AS 2 (the Indian Accounting Standard on inventories) requires inventory at the lower of cost and NRV (Ind AS 2, paragraph 9).

Cost may not be recoverable when goods are damaged, partly or wholly obsolete, or their selling prices have fallen. The write-down is normally made item by item, and it is an expense in the period it occurs. If NRV later recovers, the write-down is reversed. Businesses that follow the older Accounting Standard 2 (AS 2) apply the same lower-of-cost-and-NRV principle.

Worked example (illustrative). An item costs ₹1,000. You expect to sell it at ₹700 and selling costs are ₹50, so NRV is ₹650. The write-down is ₹350 per unit. On 400 units that is ₹1,40,000 (350 × 400). The entry is a debit to inventory write-down expense in the profit and loss account and a credit to a provision for slow moving stock.

The standard asks for NRV, not a flat percentage. Age is the trigger for a review. If your policy uses age bands with rising provision rates, set the bands from how your own stock sells and apply them the same way every year. A policy you change each year invites questions.

An auditor will typically test four things. Run them yourself first:

Credit is blocked when goods are destroyed, written off, or given away as gifts or free samples. Section 17(5)(h) of the Central Goods and Services Tax (CGST) Act, 2017 blocks input tax credit (ITC), the GST you claimed on purchases, on goods "lost, stolen, destroyed, written off or disposed of by way of gift or free samples" (CBIC, section 17).

Selling the goods, even at scrap value, is a taxable sale and does not trigger section 17(5)(h). On our reading, an NRV provision leaves the goods on your books, so it is not a write-off and does not trigger the reversal either.

As an illustration, take 400 units costing ₹1,000 each (₹4,00,000 in total) bought with 18% GST. If you destroy or donate them after claiming full credit, you reverse ₹72,000 (4,00,000 × 18%) in your GST return for that period. If you sell the same units to a scrap buyer, you charge GST on the sale and reverse nothing. Plan the route before you act, and confirm it with your chartered accountant (CA).

Income tax follows a valuation rule. As of October 2026, the Income-tax Act, 2025 has applied since 1 April 2026, and its section 277 corresponds to section 145A of the 1961 Act (TaxTMI), under which closing stock is valued at the lower of cost and NRV (Income Tax Department). A write-down to NRV is therefore a valuation question, not only a provision. Whether a flat-percentage provision is accepted is a separate question that depends on the facts, so confirm it with your CA. Keep this evidence for any write-off:

Set the floor price from your best real alternative, not from what you paid. Our recommendation: the floor is the best net offer you can get from a liquidator or supplier return, plus the carrying cost you avoid each month (stock value × monthly interest rate). Sell any lot at or above that floor. Use NRV for the accounts, not for the price.

For a ₹4,00,000 lot at 18% a year (1.5% a month), the avoided carrying cost is ₹6,000 a month (4,00,000 × 1.5%). Work down this order and stop when the stock clears:

Fix it at the purchase order. In our experience, slow stock is mostly a buying decision made months earlier, so reorder from real lead times and sales rates, not from a feeling that you should keep some on hand. The reorder point formula turns lead time and demand into a trigger quantity.

Three habits keep the report short:

We built Arka Inventory natively on Salesforce so that stock, orders and purchasing sit in one place. Our inventory visibility shows inventory on hand across locations, inventory on order, expected lead times and raw material availability, so you see what you hold and what is already coming.

• Reports. Our custom reports and dashboards are configurable around your own stock and order data. If you need a view that is not there, we can build it. The inventory dashboard guide shows what to put on one.
• Alerts. We alert you when items approach or fall below minimum stock levels, so reorders stay tied to need.
• Purchasing. Our forecasting and purchase automation lets you plan purchases using real orders, forecasts and stock, and schedule requisitions or purchase orders.
• Expiry. We track lot, batch and expiry dates, so ageing stock is visible by batch.
• Accounts. We integrate with Tally and QuickBooks Online.

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