Inventory how-to

How to calculate inventory turnover for your store

Inventory turnover measures how many times you sell through your average stock in a given period.

Short answer: Inventory turnover measures how many times you sell through your average stock in a given period. Divide your cost of goods sold (COGS) for the period by your average inventory value for that same period. A higher number means stock moves fast, a lower number means cash is sitting on shelves.

The formula

Turnover = COGS for the period / average inventory value for the period. Average inventory value is usually (starting inventory value + ending inventory value) / 2. Use the same time period for both numbers, such as a month, quarter, or year.

Turning it into days

Once you have turnover for a period, you can convert it to days of stock. Days of inventory = number of days in the period / turnover. This tells you roughly how many days it takes to sell through your average stock, which is easier to act on than a raw ratio.

Per SKU vs whole store

A single store-wide number hides a lot. Fast sellers and slow sellers average out and the result can look fine even when some SKUs are overstocked for months. Calculate turnover per SKU or per category where you can, so you can see which products are tying up cash.

What counts as low or high

There is no universal good number. It depends on your product type, margins, and how often you restock. Track your own turnover over time and compare it to your past periods, rather than chasing an external benchmark.

Step by step

  1. Pull your COGS for the period from your accounting or sales records.
  2. Get your inventory value at the start and end of the period, at cost.
  3. Average the two inventory values: (start + end) / 2.
  4. Divide COGS by that average to get turnover.
  5. Divide the number of days in the period by turnover to get days of stock.
  6. Repeat per SKU or category, not just store-wide, to spot slow movers.
  7. Compare the result to your own past periods to judge if it is improving.

Worked example

A store had $20,000 of inventory at cost on January 1 and $16,000 on January 31. Average inventory is (20,000 + 16,000) / 2 = $18,000. COGS for January was $36,000. Turnover = 36,000 / 18,000 = 2.0 for the month. Days of stock = 31 / 2.0 = about 15.5 days, meaning the store sells through its average stock roughly every two weeks.

How SteadyShelf helps

SteadyShelf does not calculate inventory turnover or pull COGS, since it is not an accounting tool. What it does give you is daily sales per variant and days-of-stock estimates from your current on-hand, which you can use alongside your own turnover math to spot which SKUs are overstocked or understocked.

$29/month flat, unlimited products and suppliers, 30-day free trial. Run the numbers now with the free reorder point calculator.

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Related guides

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FAQ

Should I calculate turnover using retail price or cost?

Use cost, not retail price. Turnover is meant to measure how fast you convert inventory investment into sales, so both COGS and inventory value should be at what you paid, not what you charge customers.

How often should I recalculate turnover?

Monthly is practical for most small stores, since it lines up with typical reporting and lets you spot trends without too much noise. Seasonal or slow-moving SKUs may be worth checking quarterly instead.

Let SteadyShelf do this math for every SKU

Order-by dates per supplier, seasonal forecasts and draft POs for your Shopify store. $29/month after a 30-day free trial.

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