Inventory glossary

What is Inventory write-down?

Inventory write-down is a reduction in the recorded value of stock on your books because it is worth less than what you paid for it.

A write-down matters because it shows your real profit, not an inflated one. If you bought 200 candles at $5 each but they only sell for $3 now due to damage or going out of style, keeping them valued at $5 overstates your assets and hides a loss that already happened.

Use write-downs to keep your books honest and to spot which products are dragging on your cash. Reviewing items before you write them down also helps you decide whether to discount them hard, bundle them, or just accept the loss and move on.

Formula

Write-down amount = (Original unit cost - Current value per unit) x Quantity on hand

Example

A candle store bought 200 units at $5 each, for a total cost of $1,000. After a packaging change, the old design candles can only be sold at $3 each. Write-down = ($5 - $3) x 200 = $400, so the inventory value on the books drops from $1,000 to $600.

Common mistakes

  • Not writing down stock until it is a complete loss, instead of adjusting value as soon as it declines.
  • Confusing a write-down with a write-off, which removes the item's value entirely rather than reducing it.
  • Forgetting to update inventory records after a write-down, so reports still show the old cost.

Inventory write-down and SteadyShelf

SteadyShelf does not handle accounting or inventory valuation, but better forecasting through it can reduce how often you overbuy and end up needing write-downs.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Dead stock · Obsolete inventory · Inventory valuation · Clearance inventory · Slow-moving inventory

Full inventory glossary

FAQ

How is a write-down different from a write-off?

A write-down lowers the recorded value of stock that is still sellable but worth less than before. A write-off removes the value entirely, treating the stock as a total loss with nothing recoverable.

When should a small store record a write-down?

Record it as soon as you know the stock is worth less than its recorded cost, such as after damage, a price drop, or when an item becomes outdated. Waiting too long just delays an accurate picture of your finances.

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