Days inventory outstanding calculator

A UK candle brand has opening stock of £26,000 and closing stock of £34,000 at cost, and £120,000 cost of goods sold for the year.

• Average inventory: stock on your balance sheet, at cost. With only start and end figures, add them and halve it.
• Cost of goods sold: usually called cost of sales on a UK profit and loss report.
• Days: match the period of your cost of goods sold. A quarter of costs goes with 90 days.

• Using revenue instead of cost of goods sold. It makes DIO look shorter than it is.
• Valuing stock at retail price. Use what you paid.
• Mixing periods. A quarter's costs with 365 days gives a DIO four times too high.
• One stock count in a seasonal business. A year end just before or after peak season skews the average.
• Comparing across categories. Compare against your own past periods first.

There is no single good number, because it depends on what you sell. Food, beauty and fast fashion brands often turn stock in weeks, while furniture, jewellery and seasonal ranges can hold it for months. As a rough rule of thumb, under 60 days is quick and over 180 days is slow for most online stores. The most useful comparison is your own DIO last quarter and last year: if it is rising while sales are flat, cash is building up on your shelves.

They measure the same thing from two sides. Inventory turnover is how many times you sell through your average stock in a period: cost of goods sold divided by average inventory. DIO turns that into days: the days in the period divided by turnover. A turnover of 4 times a year is a DIO of about 91 days. Higher turnover means a lower DIO.

Order smaller quantities more often, especially on slow movers. Clear dead stock with bundles or a sale rather than letting it sit. Reorder from real sales velocity instead of gut feel, with a reorder point for each product. Ask suppliers for shorter lead times or lower minimum order quantities. Every day you take off DIO frees roughly one day of cost of goods sold in cash.

DIO is how long cash sits in stock. Days sales outstanding (DSO) is how long customers take to pay you, and days payable outstanding (DPO) is how long you take to pay suppliers. Together they make the cash conversion cycle: DIO plus DSO minus DPO. For most online stores DSO is only a few days, because customers pay at checkout and payment providers settle quickly, so DIO is usually the biggest part of the cycle.

Use cost of goods sold. Stock is valued at what you paid for it, so dividing it by revenue, which includes your margin, mixes cost with selling price and makes your DIO look shorter than it really is.

Inventory, often called stock, is on your balance sheet in Xero, QuickBooks or Sage, and cost of goods sold usually appears as cost of sales on your profit and loss report. If your books do not track stock, your inventory app or Shopify's inventory reports can give a stock value at cost, as long as unit costs are filled in.

No. Buying ahead of peak season, taking a bulk discount or working with a supplier with long lead times can all push DIO up for good reasons. It becomes a problem when stock builds up faster than sales, because that cash cannot be used for marketing, new products or the next reorder.