Inventory
Write Off Dead Stock on a Schedule
Obsolete inventory doesn't get written off because the write-off hits this year's numbers while the hope of selling it costs nothing visible. That asymmetry is the whole problem.
Dead stock persists on balance sheets for a structural reason rather than an operational one. Writing it off is a visible loss in the current period. Continuing to carry it costs warehouse space and working capital, neither of which appears as a line anyone is accountable for. Given that asymmetry, the rational individual decision is always to wait, and the collective result is a warehouse full of inventory nobody expects to sell.
Make it a policy, not a judgement
The fix is to remove the monthly decision. Set provisioning rules by ageing band and apply them automatically, so carrying dead stock becomes visible in small increments rather than arriving as one large surprise.
Applied consistently, this converts an annual argument into an accounting policy, and it puts a number against the cost of hoping.
Use the right ageing signal
Age from last movement, not from receipt date. A part received four years ago that shipped last week is live stock; a part received last quarter that has never moved and has no forward demand is not. Where you have forecast data, an item with zero demand in the next twelve months is obsolete regardless of how recently it arrived.
Carrying obsolete stock is not free. It is a cost with no line item, which is why it wins every argument.
Exhaust the recovery options in order
• Sell it — discount, bundle, or offer it to the customer who originally specified it.
• Return it — some suppliers will take stock back under a stocking agreement.
• Redeploy it — another site or another product may still consume it.
• Sell to a liquidator — recovers little, but recovers something and frees the space.
• Scrap it — and record the disposal properly.
The order matters because each step down loses value, and because skipping straight to scrap wastes recoverable cash. But time-box the whole sequence: ninety days per step, then move on.
Separate the decision from the blame
Write-offs stall when they are treated as an accusation. Someone forecast badly, or a product was discontinued, or a customer contract ended — and the write-off makes that visible years later. Review the disposal decision and the root cause in separate meetings, or the disposal will keep being deferred to protect the conversation.
Then close the loop
Report new obsolescence created per quarter, by category and by the reason it arose. The stock you write off is history; the stock you are about to create is the number that can still be changed, and it usually traces back to two or three recurring causes — over-ordering on launch, minimum order quantities, and engineering changes without a run-down plan.
The asymmetry framing is exactly it. Nobody wants to take the hit in their own year, so it rolls forward until a new finance director arrives and takes it all at once as a one-off.
Automatic provisioning by ageing band removed the negotiation entirely. It's a policy, not a monthly argument about whether this particular batch might still move.
Worth adding: physically segregating written-off stock stops it being picked and shipped, which we managed to do twice before we moved it to a separate cage.