Inventory how-to
How to free up cash tied up in inventory
Cash gets stuck in inventory when you hold more stock than you sell in a reasonable window.
Short answer: Cash gets stuck in inventory when you hold more stock than you sell in a reasonable window. The fix is to cut order quantities and reorder frequency on slow movers, stop over-ordering fast movers "just in case," and sell down excess with discounts or bundles before it gets stale. Do this per SKU, not at the store level, since one bloated variant can hide a healthy average.
Find where the cash actually sits
Pull a report of on-hand units by variant and multiply by your cost per unit. Sort it high to low. The top 10-20 variants by tied-up cash are usually where you need to act first, not your whole catalog.
Check days of stock, not just unit counts
A SKU with 500 units sounds like a lot, but if you sell 50 a day that is 10 days of stock, which is fine. A SKU with 50 units selling 1 a day is 50 days of stock, which may be excess. Days of stock = on hand divided by daily sales. Use this to separate genuinely overstocked SKUs from SKUs that just look big.
Stop reordering before you need to
The most common cause of tied-up cash is reordering a SKU before the previous order even sells through. Check your order-by date against actual days of stock remaining. If you have 60 days of stock and a 14-day lead time, you do not need to order yet, even if a supplier offers a deal.
Clear the excess deliberately
For SKUs with too much stock, run a discount, bundle them with faster movers, or feature them in email and ads for a short window. Set a date to review again. Do not just let them sit and hope demand catches up, since that is how cash stays locked for months.
Rebuild with tighter numbers
Once a SKU is cleared down, reorder using actual recent sales and a lead time plus safety days you trust, not the quantity you ordered last time out of habit. Smaller, more frequent orders free up cash compared to large infrequent ones, as long as your supplier's minimums allow it.
Step by step
- Pull on-hand units by variant and multiply by unit cost to rank cash tied up per SKU
- Calculate days of stock (on hand / daily sales) for your top 20 by cash tied up
- Separate true excess (high days of stock) from fast movers that just look big
- Push excess stock with discounts, bundles, or targeted promotion on a set timeline
- Delay any reorder where days of stock already covers lead time plus safety days
- Reset future order quantities using recent sales data, not past order habits
- Repeat this review monthly so cash does not quietly pile up again
Worked example
A store has 400 units of a phone case on hand, costing $4 each, so $1,600 is tied up. Daily sales are 4 units, giving 100 days of stock. Lead time is 14 days and safety stock is 7 days, so the reorder point is 4 x (14+7) = 84 units. With 400 on hand, the store is nearly 5x over what it needs and should hold off ordering for months while running a promotion to sell the excess down.
How SteadyShelf helps
SteadyShelf forecasts daily sales per variant and tells you the order-by date per SKU, which stops you from reordering too early and adding more cash to stock you do not need yet. It does not generate discount campaigns or decide which excess stock to promote, so clearing existing overstock is still a manual call on your part.
$29/month flat, unlimited products and suppliers, 30-day free trial. Run the numbers now with the free reorder point calculator.
SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.
Related guides
- How to get rid of dead stock
- How to handle a short shipment from a supplier
- How to handle a supplier price increase
- How to forecast without Stocky
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FAQ
Is it better to hold safety stock or keep cash free?
Safety stock protects against stockouts, but too much of it just ties up cash the same way excess inventory does. Keep safety days realistic, based on how variable your supplier's lead time actually is, rather than padding every SKU equally out of caution.
Should I stop stocking slow-moving SKUs entirely?
Not automatically. Some slow movers still matter for customers or margin. But if a SKU has very high days of stock and low sales velocity with no clear reason to keep it, it is a candidate to discontinue rather than reorder.
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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