The concept of turnover is often encountered in economics. One of the most frequently analyzed economic indicators is inventory turnover.

Inventories are the least liquid short-term assets, so they are subject to risks that others are not exposed to. Inventories are frozen funds because they represent money that the business does not use. The vast majority of organizations try to avoid large inventory with reduced turnover. The best way out- have enough available funds obtained by accelerating turnover.

Excessive ones often lead to unnecessary costs and reduced profit levels. All reserves are a constantly changing quantity, therefore, to characterize them, they calculate average stock goods. It is determined in monetary and physical terms; in general and for various product groups.

There are several types of inventory turnover:

Each individual item in physical terms (by volume, pieces, weight);

Each individual item by cost;

Collections of items or total stock in kind;

Collections of product items or total inventory by value.

Inventory turnover is characterized by the turnover ratio. This indicator shows the number of turnovers of the average balance of goods for a certain (reporting) period. This coefficient can be calculated based on various parameters and for different time periods, for a set of items or one item of goods. Often referred to simply as “inventory turnover.” The most popular formulas for calculating the turnover ratio:

Inventory to cost ratio = cost of goods sold during a given period / average investment in inventory.

Inventory ratio in physical terms = quantity of goods sold for a certain period / average quantity of inventory for this period.

Position inventory value ratio = the ratio of the total cost of all units of a given position sold during a certain period / the average investment in inventory for this position for this period.

To calculate this indicator, it is necessary to determine: the average stock of goods and turnover for a certain period, billing period(week, quarter, month, year).

Inventory turnover for one item in terms of value and quantity gives the same result, but the totality of positions in terms of quantity differs from this indicator in terms of value. The reciprocal of the turnover ratio is used to characterize the average balances per unit of sale of goods in quantitative and cost terms. As a rule, the average duration of turnover of these funds in days is equal to the ratio of a certain period to the turnover ratio (the number of turns). The average duration of such a turnover is called “average inventory in days.”

The inventory turnover period in days is characterized by the speed of commodity circulation and the time of one turnover:

Inventory turnover in days = average inventory / cost of goods sold.

When working with indicators, the following should be taken into account: important points:

Turnover is calculated only where there are registered goods in warehouses;

Those that have not been capitalized and are written off from the warehouse are not taken into account in the calculations;

Sold goods that are in the warehouse and not shipped to the buyer are also not taken into account;

Inventories and turnover should be calculated in the same quantities;

Analysis of inventory turnover must be carried out in dynamics;

In each region, each type of goods has its own turnover rates.

There is one pattern: the higher the inventory turnover, the less time they spend in warehouses and the faster they turn into money again.

Unit of measurement:

Explanation of the essence of the indicator of the period of one inventory turnover

Period of one inventory turnover (English equivalent – ​​Days’ Sales in Inventory, Inventory Turnover in Days) – indicator business activity, which indicates the efficiency of a company's inventory management. The coefficient is calculated as the ratio of the product of the number of days in a year by the average annual amount of inventory to the amount of cost. The value of the indicator indicates how many days inventory is stored in the company's warehouse.

Standard value of the period of one inventory turnover:

The decrease in value during the study period is a positive trend. It says that less funds distracted by stockpiling. To determine the company’s performance in this area, it is advisable to compare the indicator with the values ​​of competitors.

The financial institution offers the following regulatory indicators depending on the company’s field of activity:

Table 1. Normative value indicator by area of ​​activity, days

Source: Vasina N.V. Modeling the financial condition of agricultural organizations when assessing their creditworthiness: Monograph. Omsk: Publishing House NOU VPO OmGA, 2012. p. 49.

In general, the rule is that the lower the period of one inventory turnover, the more effective control the process of formation and use of reserves.

It is worth remembering that the indicator value may be too low. In this case, the production or sales process may be paralyzed. Therefore, the inventory management policy should take into account seasonal fluctuations, changing customer tastes, industry and production process characteristics, possible unforeseen situations during delivery, and other factors.

Directions for solving the problem of finding an indicator outside the standard limits

If the indicator value deviates from the standard value, it is necessary to optimize the inventory structure. To do this, you can use methods such as ABC analysis, XYZ analysis and others. Reducing the volume of inventories will reduce the amount of necessary financial resources, which will reduce financial costs or increase the company's income by investing money in intensifying activities.

Formula for calculating the period of one inventory turnover:

Period of one inventory turnover = (360*Average annual inventory) / Cost (1)

Period of one inventory turnover = 360 / Inventory turnover (2)

The average annual volume of reserves (most the right way) = Sum of inventory at the end of each working day / Number of working days (3)

Average annual inventory (if only weekly data is available) = Sum of inventory at the end of each week / 51 (4)

Average annual inventory (if only monthly data is available) = Sum of inventory at the end of each month / 12 (5)

Average annual inventory (if only quarterly data is available) = Sum of inventory at the end of each quarter / 4 (6)

Average annual inventory (if only annual data is available) = (Beginning of year inventory + End of year inventory) / 2 (7)

Monthly, weekly and daily inventory estimates are available for internal analysis, but not for external analysis. Quarterly figures may be available for external analysis.

Notes and corrections:

1. During the year, the value of the indicator may fluctuate (for example, due to seasonal factors). At the end of the period, the company's business activity decreases, the volume of inventories, work in progress and stock finished products will be lower, so the period of one inventory turnover may be overestimated. If a company prepares its financial statements at the peak of its business activity, inventory turnover may be overestimated and the period of one inventory turnover may be underestimated. To determine the exact value of the indicator, you must use one of the formulas 3-6.

An example of calculating the period of one inventory turnover:

Company OJSC "Web-Innovation-plus"

Unit of measurement: thousand rubles.

Period of one inventory turnover (2016) = (360*(87/2+88/2))/405 = 77.78 days

Period of one inventory turnover (2015) = (360*(88/2+75/2))/487 = 60.25 days

The efficiency of inventory management is decreasing at OJSC Web-Innovation-plus. This is evidenced by a significant increase in the period of one inventory turnover - from 60.25 days in 2015 to 77.78 days in 2016. The reason for this trend is a decrease in production and sales volumes, while inventory formation standards remained at the previous level. It is necessary to review them and work towards increasing inventory turnover and reducing the period of one inventory turnover.

Inventory turnover ratio is an efficiency ratio that shows how efficiently inventory is handled by comparing the cost of goods sold to the average amount of inventory over a given period. In other words, it measures how many times a company sold during the year.

This ratio is important because total turnover depends on two main components of activity. The first component is purchase of shares. If a company has large amounts of inventory purchased during the year, it will have to sell more inventory to improve its turnover. If a company cannot sell more inventory, it will incur storage costs and other expenses.

The second component is sales. Sales must match inventory purchases, otherwise inventory counting will not be effective. This is why purchasing and sales departments must work closely together.

Definition

Inventory turnover represents a value that determines how many times a company's inventory is sold and replaced within a given period of time. To find out how many days it takes to sell equipment, you need to divide the sales volume by the average inventory value.

Inventory turnover ratios depend on the company, as well as the industries of development. Low-margin industries tend to have higher inventory turnover ratios as they offset lower profits from higher sales forecasts.

For all these reasons, comparisons of inventory turnover ratios tend to be most appropriate among firms within the same industry, and the determination of a "high" or "low" ratio should be made in that context.

Inventory turnover measures how quickly a company sells products and typically compares this indicator with industry average values. Low turnover suggests weak sales and therefore excess inventory. A high ratio implies strong sales and/or deep discounts.

The speed at which a company can sell is a key indicator of business performance. It is also one of the components of calculating return on assets. As such, high turnover means nothing if the company is not making a profit on every sale.

Calculation and formula

The formula for calculating inventory turnover is as follows:

Kob.z. = TC / Mc.r., where

Kob.z.– inventory turnover ratio, TS– cost of goods sold, Mc.r.– average annual cost of inventories.

Inventory turnover is calculated as sales divided by average inventory. Average inventories are calculated as:

(quantity at beginning of inventory count + ending inventory) / 2

Analysts divide the quantity of average inventory instead of sold inventory for greater accuracy when calculating turnover, since sales include a markup on cost.

In accounting, this ratio is calculated as follows:

Kob.z. = line 2110 / line average 1210

In general, low inventory turnover ratios indicate that a company is carrying too much inventory, which may indicate poor management or low sales. Excess inventory ties up a company's cash and leaves the company vulnerable if market prices drop. Conversely, high inventory turnover rates may indicate high sales and timely inventory counts.

High inventory turnover also means that the company quickly replenishes reserves cash. An exceptionally high inventory turnover may indicate that the company is often making ineffective purchases and, therefore, losing some sales.

It is important to understand that the timing of the purchase of inventory, especially that made in preparation for special promotions, may slightly change turnover.

Various accounting methods also affect inventory turnover ratio. During periods of rising prices, using the LIFO method, turnover indicates more high cost products sold and lower inventories than using .

In addition, companies using the LIFO method also have more stocks than FIFO companies. The LIFO method increases the cost of production, which reduces profits and, in turn, reduces tax liability. The cost of goods sold is reflected in income.

Average inventory can be determined as follows::

TZsr. = (TZ1 + TZ2 + … + TZn) / n-1, where

TZn- the amount of inventory for individual dates of the analyzed period (rubles, dollars, etc.), n— number of dates in the period.

Turnover in days:

Obdn = (TZsr * Number of days) / T, where

TZsr- average inventory, T— turnover for a given period or sales volume.

Turnover in times is determined using the following formulas:

Image = Number of days / Weekdays

Image = Turnover (T) / Average inventory (TZav)

Product inventory level:

Uz = (Inventory at the end of the analyzed period (TZ) * Number of days (D)) / Turnover for the period

The turnover rate is the expected number of times a product will be turned over in a certain period of time. Defined as follows:

Turnover rate = 12 / (f * (OF + 0.2 *L)), where

OF — average order frequency per month, L — middle period delivery in months, f is a coefficient that summarizes the effect of other factors that may affect trade turnover.

Analysis

Inventory turnover is an indicator of how effectively a company can control the sale of its goods.

falls, That

1. There may be an increase in the amount of assets used.
2. There may be a drop in sales volume.

If the turnover ratio growing, That

1. Capital turns over faster, each unit of inventory brings more profit.
2. It may be artificially inflated when switching to using a rented OS.

The higher a company's inventory turnover, the more efficient production is and the lower the need for working capital for its organization.

A webinar on determining turnover is presented below.

where About days – turnover in days, days

TZ avg – average inventory for the period, pieces

Q – number of days in the period, days

Calculations showed that the turnover rate in days decreased in 2013 compared to 2012. This indicates an acceleration in the turnover of the “Standard pillow” product item by 3 days. The acceleration of turnover reflects a positive trend.

Turnover in times tells how many times during the period the product “turned around” and was sold. Calculated using formula (9):

(9)

where About times - , times

TO – turnover for the period, pieces

TZ avg – average inventory for the period, pieces

12-13 times a year is the same as 28-31 days of turnover, so there is no fundamental difference in the calculation method. The same conclusions can be drawn. But, in my opinion, calculating turnover in days is more convenient, since you can more clearly trace the dynamics of acceleration or deceleration of turnover.

When analyzing the data obtained, it is worth paying attention to the credit line for this product, that is, how long it will take us to pay for it. The BELASHOFF supplier specified the following payment procedure in the contract:

20% prepayment

80% no later than 20 calendar days from the moment of delivery

This means that the goods will not have time to turn around, money for them will not yet be received, and the enterprise will be forced to use borrowed funds.

For effective operations, turnover in days should not exceed the loan term.

Table 8 - Comparative data on margin and turnover

	Purchase price	Selling price		Turnover in days	Turnover (once a year)	Profit from one unit of goods per year	Priorities
Pillow Standard
Charm pillow
Pillow Dialogue

At the end of 2008, the majority Russian companies in anticipation of further sales growth, they continued to increase production or purchase volumes. However, the development of the financial crisis led to a significant decrease in demand. As a result, the products were unclaimed, warehouses were overcrowded, and financial condition for most market entities has deteriorated

In addition, during the crisis, many enterprises faced problems with financing current activities and, as a result, lost the opportunity to have excess inventory. In this regard, enterprises are currently forced to optimize and manage their costs associated with inventory.

How can calculating the optimal inventory size help the CFO improve the efficiency of managing current assets?

To meet current demand for a product, an enterprise must provide a certain level of inventory, the amount of which is determined on the basis of data for previous periods. At the same time, no matter how accurately we try to predict demand, the actual consumption of a product can be either more or less than predicted.

Also, in order to replenish inventory in a timely manner (calculate inventory turnover), the enterprise must predict the planned lead time of the order by the supplier, the value of which is based on data on past deliveries. This value is also difficult to predict with 100% accuracy. Sometimes the actual order fulfillment time is longer than predicted.

In connection with the situation of uncertainty described above, the enterprise is forced to create safety stock to ensure that customer orders can be fulfilled when actual consumption exceeds forecasts, and to prevent stock-outs from occurring if lead times are unplanned.

Thus, safety stocks are part of production and sales stocks designed to minimize logistics and financial risks associated with unforeseen fluctuations in demand for manufactured goods, failure to fulfill contractual obligations for the supply of raw materials and materials (violation of deadlines, supply volumes, quality of supplied resources and etc.), failures in production and technological cycles and other unforeseen circumstances.

By creating a safety stock, an enterprise can reduce the risks of order failure or incomplete order fulfillment. However, reducing risks comes at a price. Therefore, when determining the size of safety stocks, the financial director is between two fires: on the one hand, the creation of additional safety stocks causes additional costs, on the other hand, their absence may entail possible losses associated with non-fulfillment of the order.

In this regard, the main task of the financial director in the inventory management process is to, on the one hand, reduce storage costs and reduce the amount working capital“frozen” in the goods, on the other hand, reduce the risks of non-fulfillment of the customer’s order. This is the whole point of calculating reserves.

To reduce the risk of order failure, it is necessary to control two quantities:

safety stock size And order point(the moment of replenishment when a certain level of inventory size is reached).

Let's consider how the standard for the optimal size of warehouse stocks is determined by the financial department of the Myasprominvest meat processing enterprise.

At Myasprominvest, all material resources used in production are divided into three groups according to the degree of their influence on relevant costs.

Relevant costs associated with inventories are usually divided into the following groups:

• costs associated with storing inventory;
• costs associated with fulfilling orders;
• losses arising from a shortage of inventories (expenses in the form of loss of part of the profit or loss of customers and part of the company’s business reputation).

Using the ABC method, the company grouped inventories into three groups (A, B, C).

Thus, the first group of the most important resources included meat, spices, and raw materials for packaging. The second group includes resources, the absence of which may affect production process, but will not cause it to stop: mainly fuels and lubricants for a fleet of vehicles, as well as spare parts for equipment repair. And the third group is all other resources that are purchased as needed and have virtually no impact on the production process.

Based on the degree of importance for group A inventory management, the company uses the most sophisticated methods, carefully monitoring turnover, statistics and increasing the accuracy of calculations. It is for the stocks of this group that the company calculates the size of the safety stock and the order point. For group B more than simple calculations. Group C inventories are tracked less frequently, with reasonable safety stock being created to ensure they are always in stock. The functions of control over inventories in this category are delegated to middle managers.

For the selected group A, it is calculated separately current and safety stocks, each of which, in turn, can be divided into certain elements.

The definition of safety stock was made above. Current stock– the main part of the production (sales) stock, intended to ensure continuity of the production (sales) process between two adjacent deliveries.

Rationing the current stock consists of finding the maximum value of production requirements in material values between two subsequent deliveries. This need is defined as the product of average daily consumption by the delivery interval (the time interval between placing an order and receiving it):
Ztek = Rday * T,

Where Ztech– current stock;

Rday

T– delivery interval, days

In turn, the average daily consumption is found by dividing the total need for material by the rounded number of calendar days in the planning period:
Rday = Ryear: 360

Where Rday– average daily consumption of materials;

Ryear- respectively annual consumption materials.

Safety stock rationing is based on the following calculation: the product of the average daily material consumption by the gap in the supply interval divided by two:
Zstr = Rday (Tfact – Tplan) / 2

Where Zstr– safety stock;

Tfact, Tplan– actual and planned delivery intervals, respectively.

When calculating the safety stock for commodity stocks of groups B and C, the Myasprominvest company uses a consolidated estimate (safety stock is taken in the amount of 50% of the current stock).

Let's look at an example of calculating safety stock and order points. The Myasprominvest enterprise purchases raw meat from a supplier, and the annual volume of demand for 2008 was 3,600 tons, the average delivery period was 14 days, the maximum deviation of the delivery time from the average was 5 days. The enterprise uses raw materials evenly, and a reserve stock equal to 6 t.

The average consumption of raw materials will be:
Rday = 3,600 t / 360 = 10 t

Ztek = 10 * 14 = 140 t

Zstr = 10 * 5 / 2 = 25 t

The order renewal point will be equal to:
Tz = 140 t + 25 t = 165 t

This means that only when the stock level of raw materials in the warehouse reaches 165 tons, the purchasing service should place another order to the supplier.

Thus, the financial service of the enterprise controls financial risks associated with possible losses from the formation of shortages, and also prevents abuse on the part of the procurement service associated with unreasonable purchases of raw materials.

In a fixed order quantity inventory control system, the constant is the replenishment order size. The time intervals at which the order is placed may vary in this case.

The standardized quantities in this system are the order quantity, the amount of stock at the time the order is placed (the so-called order point) and the amount of safety stock. A purchase order is placed when the stock on hand is reduced to the reorder point. After placing an order, the stock continues to decrease, since the ordered goods are not delivered immediately, but after some period of time t. The amount of stock at the order point is chosen such that in a normal working situation during time t the stock does not fall below the insurance value. If demand unexpectedly increases, or the delivery date is missed, the safety stock will begin to work.

In practice, an inventory control system with a fixed order quantity is used mainly in the following cases:

• large losses due to lack of stock;
• high costs of storing inventory;
• high cost the ordered product;
• high degree of demand uncertainty;
• Availability of price discount depending on the quantity ordered.

Once the choice of a replenishment system has been made, it is necessary to quantify the size of the ordered batch, as well as the time interval after which the order is repeated.

Also, to optimize costs associated with warehouse stocks, the financial service can calculate the optimal batch size of supplied raw materials and materials. The optimal batch size and optimal delivery frequency depend on the following factors:

• volume of demand (turnover);
• costs of delivery of goods;
• inventory storage costs.

The minimum total costs for delivery and storage are chosen as an optimality criterion. Both delivery costs and storage costs depend on the size of the order, however, the nature of the dependence of each of these cost items on the order volume is different. The costs of delivering goods decrease as the order size increases, since transportation is carried out in larger quantities and, therefore, less frequently. Storage costs increase in direct proportion to the size of the order. By adding both graphs, we obtain a curve reflecting the nature of the dependence of the total costs of transportation and storage on the size of the ordered batch.

The optimal order size is determined by Wilson's formula:
Where Sopt – optimal size ordered batch in pieces;

ABOUT– the required volume of purchase of goods (stock) per year in pieces;

St– costs associated with placement, delivery, acceptance of a batch of ordered goods;

Cx– costs associated with storing one unit of inventory per year.

It is worth noting that the above mathematical models may become useful tools, helping the CFO to control the situation, but these models cannot be a complete reflection of reality. In addition, decision makers need not only to know the above formulas, but also to systematically understand the processes they manage. Therefore, when exercising control over current assets, it is necessary to take into account both the specifics of the company and the restrictions caused by the realities of the Russian economy.

The CFO's job of controlling inventory may become more difficult. following problems, which the financial director needs to be aware of and, if possible, eliminate.

One of the problems often encountered at enterprises is poorly compiled product reference books: the same type of inventory can be stored under different names in different warehouses. As a result, situations are possible when the purchasing department purchases materials that are already in stock, thereby inflating storage costs and increasing the diversion of cash resources to finance working capital. It is necessary to track duplicates and eliminate them.

There are also problems associated with employee errors. For example, a delivery may be delayed because the manager forgot to send the order and sent it late, thereby increasing the order fulfillment time. A control system can eliminate this problem.

Based on the fact that the system with a fixed order size discussed above involves continuous accounting of balances to determine the order point, and also a possible large number of controlled item items complicates mathematical calculations, it is clear that the lack information system, which provides automatic calculation of indicators, will significantly complicate high-quality execution inventory management tasks and will not allow the financial director to exercise operational control over the amount of working capital diverted in inventory.

So, for example, at the Myasprominvest company, the financial department is allowed to control warehouse inventories using the 1C: Trade Management 8 software product. Based on XYZ/ABC report sales analysis, a group of stocks falling into category A is determined for which it is necessary to carry out rationing. For this category, the tool provided by the program is used Planning by order point: Based on calculated data on safety stock, current warehouse balances and planned deliveries of goods, a report is generated with recommendations for the purchase of goods, on the basis of which control of purchases and payments is carried out.

Considered example of one of the Russian enterprises and description common methods solutions to the problem of calculating inventory sizes are designed to help a large number financial directors to develop their own approaches to this topic.